CompUSA 2014 Annual Report Download - page 30

26
Table of Contents
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.
During the fourth quarter of 2014 the
Company recorded a non-
cash valuation
allowance against its deferred assets in the
U.K. of approximately $1.7 million.
A change of 5% in our effective tax rate at
December 31, 2014, excluding the non-
cash
valuation allowance, would impact net
income by approximately $0.2 million.
Special 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, 2014 the
Company recorded special charges of $24.4
million for reorganization, restructuring and
asset impairment and other charges.