Cash America 2013 Annual Report Download - page 82

57
Income Taxes
As part of the process of preparing its consolidated financial statements, the Company is required to estimate
income taxes in each of the jurisdictions in which it operates. This process involves estimating the actual current tax
expense together with assessing temporary differences in recognition of income for tax and accounting purposes. These
differences result in deferred tax assets and liabilities and are included within the consolidated balance sheets.
Management must then assess the likelihood that the deferred tax assets will be recovered from future taxable income
and, to the extent it believes that recovery is not likely, it must establish a valuation allowance. An expense or benefit is
included within the tax provision in the statement of operations for any increase or decrease in the valuation allowance
for a given period.
The Company performs an evaluation of the recoverability of its deferred tax assets on a quarterly basis. The
Company establishes a valuation allowance if it is more-likely-than-not (greater than 50 percent) that all or some portion
of the deferred tax asset will not be realized. The Company analyzes several factors, including the nature and frequency
of operating losses, the Company’s carryforward period for any losses, the reversal of future taxable 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.
As of December 31, 2013 and 2012 the valuation allowance against the Company’s gross deferred tax assets
was $13.8 million and $21.8 million, respectively. In 2013, the Company released a $9.3 million valuation allowance
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 and recorded an additional $1.3 million valuation allowance related to deferred tax
assets at its Mexico subsidiaries.
The Company accounts for uncertainty in income taxes recognized in the consolidated financial statements in
accordance with ASC 740, Accounting for Uncertainty in Income Taxes (“ASC 740”). ASC 740 requires that a more-
likely-than-not threshold be met before the benefit of a tax position may be recognized in the consolidated financial
statements and prescribes how such benefit should be measured. Management must evaluate tax positions taken on the
Company’s tax returns for all periods that are open to examination by taxing authorities and make a judgment as to
whether and to what extent such positions are more likely than not to be sustained based on merit.
Management’s judgment is required in determining the provision for income taxes, the deferred tax assets and
liabilities and any valuation allowance recorded against deferred tax assets. Management’s judgment is also required in
evaluating whether tax benefits meet the more-likely-than-not threshold for recognition under ASC 740.

RECENT ACCOUNTING PRONOUNCEMENTS
See “Item 8. Financial Statements and Supplementary Data—Note 2” for a discussion of recent accounting
pronouncements that the Company has adopted or will adopt in future periods.