Cash America 2012 Annual Report Download - page 156

CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
131
temporary differences, the expected occurrence of future income or loss and the feasibility of available tax planning
strategies to protect against the loss of deferred tax assets.
In 2012, the Company recorded a valuation allowance of $21.8 million, including $12.0 million related to net
deferred tax assets at its Mexico-based pawn operations (see Note 4 for further information related to the Mexico
Reorganization), $0.5 million related to the net deferred tax asset in Mexico generated by the e-commerce segment,
and $9.3 million related to the deferred tax asset associated with the Company’s excess tax basis over its basis for
financial reporting purposes in the stock of Creazione.
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The aggregate change in the balance of the unrecognized tax benefits for the years ended December 31, 2012,
2011 and 2010 is summarized below (dollars in thousands):
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2012 2011 2010
Balance at January 1, $ 955 $ 1,082 $ 1,021
Effect of change in foreign currency rates 66 (127) 61
Balance at December 31, $1,021 $955 $ 1,082
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The balance in unrecognized tax benefits relate to pre-acquisition tax matters of Prenda Fácil. As part of the
initial acquisition of Creazione, the sellers agreed to reimburse the Company for taxes, penalties and interest that the
Company may be required to pay to taxing authorities upon challenge of pre-acquisition tax positions of Prenda Fácil.
Accordingly, the Company had recognized a receivable from the sellers for unrecognized tax benefits, including
related interest and penalties. The receivable from the sellers was included in “Prepaid expenses and other assets” in
the consolidated balance sheets as of December 31, 2012. As a result of the Company’s acquisition of the remaining
shares of Creazione in 2012, the Company released the sellers from certain contingent liabilities including any
liabilities associated with the pre-acquisition tax matters of Prenda Fácil. As a result, the receivable from the sellers
was written off as part of the remaining shares.
The Company believes that it is reasonably possible that the entire amount of its uncertain tax benefits will be
recognized in 2013 as a result of the lapse of the statute of limitations. The liability for unrecognized tax benefits,
including related interest and penalties, is classified as a non-current liability in the accompanying consolidated
balance sheets. The Company has accrued $1.7 million, $1.3 million and $1.3 million of interest and penalties as of
December 31, 2012, 2011 and 2010, respectively.
As of December 31, 2012, the Company’s 2009 through 2011 tax years were open to examination by the
Internal Revenue Service and major state taxing jurisdictions. The 2007 through 2011 tax years of the Company’s
Mexican subsidiaries were open to examination by the Mexican taxing authorities.
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