Western Union 2014 Annual Report Download - page 171

2014 FORM 10-K
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Our tax returns and positions (including positions regarding jurisdictional authority of foreign governments to impose tax)
are subject to review and audit by federal, state, local and international taxing authorities. An unfavorable outcome to a tax audit
could result in higher tax expense, thereby negatively impacting our results of operations. We have established contingency
reserves for a variety of material, known tax exposures. As of December 31, 2014, the total amount of unrecognized tax benefits
was a liability of $96.8 million, including accrued interest and penalties, net of related items. Our reserves reflect our judgment
as to the resolution of the issues involved if subject to judicial review. While we believe that 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, and such resolution could have a material effect on our effective tax
rate, financial condition, results of operations and cash flows in the current period and/or future periods. 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 the Company's tax
position as recorded in the financial statements and the final resolution of a tax issue during the period. Such resolution could
increase or decrease income tax expense in our consolidated financial statements in future periods and could impact our operating
cash flows. For example, in 2011, we reached an agreement with the United States Internal Revenue Service ("IRS") resolving
substantially all of the issues related to the restructuring of our international operations in 2003, which resulted in a tax benefit
of $204.7 million related to the adjustment of reserves associated with this matter and requires cash payments to the IRS and
various state tax authorities of approximately $190 million, plus additional accrued interest, of which $94.1 million has been
paid as of December 31, 2014. See the "Capital Resources and Liquidity" discussion in Part II, Item 7, Management's Discussion
and Analysis of Financial Condition and Results of Operations.
The IRS completed its examination of the United States federal consolidated income tax returns of First Data, which include
our 2005 and pre-Spin-off 2006 taxable periods and issued its report on October 31, 2012 ("FDC 30-Day Letter"). Furthermore,
the IRS completed its examination of our United States federal consolidated income tax returns for the 2006 post-Spin-off period
through 2009 and issued its report also on October 31, 2012 ("WU 30-Day Letter"). Both the FDC 30-Day Letter and the WU
30-Day Letter propose tax adjustments affecting us, some of which are agreed and some of which are unagreed. We filed our
protest on November 28, 2012 related to the unagreed proposed adjustments with the IRS Appeals Division. Discussions with
the IRS concerning these adjustments are ongoing. See Part II, Item 8, Financial Statements and Supplementary Data, Note 10,
"Income Taxes" for a further discussion of this matter.
Material changes in the market value or liquidity of the securities we hold may adversely affect our results of operations and
financial condition.
As of December 31, 2014, we held $1.5 billion in investment securities, the substantial majority of which are state and
municipal debt securities. The majority of this money represents the principal of money orders issued by us to consumers
primarily in the United States and money transfers sent by consumers. We regularly monitor our credit risk and attempt to
mitigate our exposure by investing in highly-rated securities and by diversifying our investments. Despite those measures, it is
possible that the value of our portfolio may decline in the future due to any number of factors, including general market conditions,
credit issues, the viability of the issuer of the security, failure by a fund manager to manage the investment portfolio consistently
with the fund prospectus or increases in interest rates. Any such decline in value may adversely affect our results of operations
and financial condition.
The trust holding the assets of our pension plan has assets totaling approximately $302.9 million as of December 31, 2014.
The fair value of these assets held in the trust are compared to the plan's projected benefit obligation to determine the pension
liability of $74.9 million recorded within "Other liabilities" in our Consolidated Balance Sheet as of December 31, 2014. We
attempt to mitigate risk through diversification, and we regularly monitor investment risk on our portfolio through quarterly
investment portfolio reviews and periodic asset and liability studies. Despite these measures, it is possible that the value of our
portfolio may decline in the future due to any number of factors, including general market conditions and credit issues. Such
declines could have an impact on the funded status of our pension plan and future funding requirements.