Western Union 2012 Annual Report Download - page 78
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73
Description Judgments and Uncertainties Effect if Actual Results Differ from Assumptions
Income tax contingencies
We recognize the tax benefit from an
uncertain tax position only when it is more
likely than not, based on the technical
merits of the position, that the tax position
will be sustained upon examination,
including the resolution of any related
appeals or litigation. The tax benefits
recognized in the consolidated financial
statements from such a position are
measured as the largest benefit that has a
greater than fifty percent likelihood of
being realized upon ultimate resolution.
We have established contingency reserves
for a variety of material, known tax
exposures. Our tax reserves reflect our
judgment as to the resolution of the issues
involved if subject to judicial review or
other settlement. While we believe our
reserves are adequate to cover reasonably
expected tax risks, there can be no
assurance that, in all instances, an issue
raised by a tax authority will be resolved
at a financial cost that does not exceed our
related reserve. With respect to these
reserves, our income tax expense would
include (i) any changes in tax reserves
arising from material changes during the
period in the facts and circumstances (i.e.,
new information) surrounding a tax issue
and (ii) any difference from our tax
position as recorded in the consolidated
financial statements and the final
resolution of a tax issue during the period.
Pursuant to the tax allocation agreement
signed in connection with the Spin-off
from First Data, we believe we have
appropriately apportioned the taxes
between First Data and us.
Our tax contingency reserves for our
uncertain tax positions as of December 31,
2012 were $111.9 million, including
accrued interest and penalties, net of
related benefits. While we believe that our
reserves are adequate to cover reasonably
expected tax risks, in the event that the
ultimate resolution of our uncertain tax
positions differs from our estimates, we
may be exposed to material increases in
income tax expense, which could
materially impact our financial condition,
results of operations and cash flows.
If we are required to indemnify First Data
for taxes incurred as a result of the Spin-
off being taxable to First Data, it likely
would have a material adverse effect on
our business, financial condition, results of
operations and cash flows.