CompUSA 2012 Annual Report Download - page 25

Table of Contents
Accounting policy Assumptions and uncertainties Quantification and analysis of effect on actual
results if estimates differ materially
Income Taxes. We are subject to taxation
from federal, state and foreign jurisdictions
and the determination of our tax provision is
complex and requires significant
management judgment. We conduct
operations in numerous U.S. states and
foreign locations. Our effective tax rate
depends upon the geographic distribution of
our pre-tax income or losses among
locations with varying tax rates and rules.
As the geographic mix of our pre-tax results
among various tax jurisdictions changes, the
effective tax rate may vary from period to
period. We are also subject to periodic
examination from domestic and foreign tax
authorities regarding the amount of taxes
due. These examinations include questions
regarding the timing and amount of
deductions and the allocation of income
among various tax jurisdictions. We
establish as needed, and periodically
reevaluate, an estimated income tax reserve
on our consolidated balance sheet to provide
for the possibility of adverse outcomes in
income tax proceedings. While management
believes that we have identified all
reasonably identifiable exposures and
whether or not a reserve is appropriate, it is
possible that additional exposures exist
and/or that exposures may be settled at
amounts different than the amounts
reserved.
The determination of deferred tax assets and
liabilities and any valuation allowances that
might be necessary requires management to
make significant judgments concerning the
ability to realize net deferred tax assets. The
realization of net deferred tax assets is
dependent upon the generation of future
taxable income. In estimating future taxable
income there are judgments and
uncertainties related to the development of
forecasts of future results that may not be
reliable. Significant management judgment
is also necessary to evaluate the operating
environment and economic conditions that
exist to develop a forecast for a reporting
unit. Where management has determined
that it is more likely than not that some
portion or the entire deferred tax asset will
not be realized, we have provided a
valuation allowance. If the realization of
those deferred tax assets in the future is
considered more likely than not, an
adjustment to the deferred tax assets would
increase net income in the period such
determination is made.
We have not made any material changes to our
income tax policy in the past three years and we
do not anticipate making any material changes to
this policy in the future.
We do not believe it is reasonably likely that the
estimates or assumptions used to determine our
deferred tax assets and liabilities and related
valuation allowances will change materially in
the future. However if our estimates are
materially different than our actual experience
we could have a material gain or loss adjustment.
In 2012 we reversed approximately $15.1
million in valuation allowances against the
deferred tax assets of our French subsidiary as a
result of the subsidiary no longer being in a
cumulative loss position.
A change of 5% in our effective tax rate at
December 31, 2012 would impact net income by
approximately $2.1 million.
Reorganization and other charges.
We
have recorded reorganization, restructuring
and other charges in the past and could in
the future commence further reorganization,
restructuring and other activities which
result in recognition in charges to income.
The recording of reorganization,
restructuring and other charges may
involve assumptions and judgments about
future costs and timing for amounts related
to personnel terminations, stay bonuses,
lease termination costs, lease sublet
revenues, outplacement services, contract
termination costs, asset impairments and
other exit costs. Management may estimate
these costs using existing contractual and
other data or may rely on third party expert
data.
When we incur a liability related to these
actions, we estimate and record all appropriate
expenses. We do not believe it is reasonably
likely that the estimates or assumptions used to
determine our reorganization, restructuring and
other charges will change materially in the
future. However if our estimates are materially
different than our actual experience we could
have a material gain or loss adjustment.
For the year ended December 31, 2012 the
Company recorded reorganization and other
charges of approximately $46.3 million for
reorganization, restructuring and asset
impairment and other charges.
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