World Fuel Services 2015 Annual Report Download - page 82

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We assessed the available positive and negative evidence to estimate if sufficient future taxable income will be generated
to use the existing deferred tax assets. On the basis of this evaluation, as of December 31, 2015, a valuation allowance of
$2.9 million has been recorded to recognize only the portion of the deferred tax asset that is more likely than not to be
realized. The amount of the deferred tax asset considered realizable could be adjusted if estimates of future taxable income
during the carryforward period change or if objective negative evidence in the form of cumulative losses is no longer present
and additional weight may be given to subjective evidence such as growth projections.
In addition, as a result of certain realization requirements of accounting guidance on stock compensation, the table of
deferred tax assets and liabilities shown above does not include certain deferred tax assets as of December 31, 2015 and
2014 that arose directly from income tax deductions related to equity compensation in excess of compensation recognized
for financial reporting. As of December 31, 2015 and 2014, we had no foreign tax credits related to the excess stock
compensation deductions that resulted in an income tax deduction or credit before the realization of the income tax benefit
from the deduction or credit. We use the “with and without” method for purposes of determining when excess income tax
benefits have been realized.
As of December 31, 2015 and 2014, our annual capital in excess of par value pool of windfall income tax benefits related to
employee compensation was estimated to be nil and $1.0 million, respectively. As of December 31, 2015, we had
unrecognized U.S. NOLs of $4.5 million related to the exercise of stock awards. When realized, the U.S. NOL will result in a
benefit recorded in additional paid in capital of $1.6 million, with a corresponding decrease in income tax payable.
We operated under a special income tax concession in Singapore which began January 1, 2008. Our current five year special
income tax concession was effective on January 1, 2013. The special income tax concession is conditional upon our meeting
certain employment and investment thresholds which, if not met in accordance with our agreement, may eliminate the benefit
beginning with the first year in which the conditions are not satisfied. The income tax concession reduces the income tax rate
on qualified sales and the impact of this income tax concession decreased foreign income taxes by $5.0 million, $7.5 million
and $6.2 million for 2015, 2014 and 2013, respectively. The impact of the income tax concession on basic earnings per
common share was $0.07 for 2015, $0.11 for 2014 and $0.09 for 2013. On a diluted earnings per common share basis, the
impact was $0.07 for 2015, $0.10 for 2014 and $0.09 for 2013.
Income Tax Contingencies
We recorded an increase of $22.4 million of liabilities related to unrecognized income tax benefits (“Unrecognized Tax Liabilities”)
and a decrease of $0.4 million of assets related to unrecognized income tax benefits (“Unrecognized Tax Assets”) during 2015.
In addition, during 2015, we recorded a decrease of $0.7 million to our Unrecognized Tax Liabilities related to a foreign currency
translation gain, which is included in other income (expense), net, in the accompanying consolidated statements of income and
comprehensive income. As of December 31, 2015, our Unrecognized Tax Liabilities, including penalties and interest, were
$56.1 million and our Unrecognized Tax Assets were $1.9 million.
We recorded a decrease of $2.1 million of liabilities related to unrecognized income tax benefits (“Unrecognized Tax Liabilities”)
and a decrease of $4.5 million of assets related to unrecognized income tax benefits (“Unrecognized Tax Assets”) during 2014.
In addition, during 2014, we recorded a decrease of $0.5 million to our Unrecognized Tax Liabilities related to a foreign currency
translation gain, which is included in other income (expense), net, in the accompanying consolidated statements of income and
comprehensive income. As of December 31, 2014, our Unrecognized Tax Liabilities, including penalties and interest, were
$33.0 million and our Unrecognized Tax Assets were $2.3 million.
The following is a tabular reconciliation of the total amounts of unrecognized income tax benefits for the year (in millions):
2015 2014 2013
Unrecognized Tax Liabilities – opening balance $ 24.3 $ 26.5 $ 22.3
Gross increases – tax positions in prior period 9.2 — 2.6
Gross decreases – tax positions in prior period (4.8) (2.8) —
Gross increases – tax positions in current period 20.9 6.6 5.0
Gross decreases – tax positions in current period — — —
Settlements — (3.6) —
Lapse of statute of limitations (2.9) (2.4) (3.4)
Unrecognized Tax Liabilities – ending balance $ 46.7 $ 24.3 $ 26.5
If our uncertain tax positions as of December 31, 2015 are settled by the taxing authorities in our favor, our income tax
expense would be reduced by $45.3 million (exclusive of interest and penalties) in the period the matter is considered settled
in accordance with Accounting Standards Codification 740. This would have the impact of reducing our 2015 effective