Express 2011 Annual Report Download - page 57

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Description of Policy Judgments and Uncertainties
Effect if Actual Results Differ from
Assumptions
Income Taxes
We account for income taxes using
the asset and liability method. Under
this method, the amount of taxes
currently payable or refundable is
accrued and deferred tax assets and
liabilities are recognized for the
estimated future tax consequences of
temporary differences that currently
exist between the tax basis and the
financial reporting basis of our assets
and liabilities.
Our accounting methodology for
calculating our tax liabilities
contains uncertainties because our
judgments may change as a result
of evaluation of new information
not previously available.
We have no reason to believe
there is a likelihood that there will
be a material change in our tax
related balances. However, due to
the complexity of some of these
uncertainties, the ultimate
resolution may result in a payment
that is materially different from
the current estimate of our tax
liabilities.
Deferred tax assets and liabilities are
measured using the enacted tax rates
in effect in the years when those
temporary differences are expected to
reverse. The effect on deferred taxes
from a change in tax rate is
recognized in earnings in the period
that includes the enactment date of
the change.
Our deferred tax asset and liability
balances contain uncertainty
because changes in tax laws and
rates may differ from the
estimates and judgments made by
management.
We may be subject to periodic
audits by the Internal Revenue
Service and other taxing
authorities. These audits may
challenge certain of our tax
positions, such as the timing and
amount of deductions and
allocation of taxable income to the
various jurisdictions.
We have no reason to believe that
our results of operations will
differ materially from our current
expectations. However, if actual
results are not consistent with our
estimates, to the extent we do not
feel we will realize the full
amount of our deferred tax assets,
we may need to record a valuation
allowance in the future.
To the extent that we prevail in
matters for which unrecognized
tax benefit liabilities have been
established or are required to pay
amounts in excess of recorded
unrecognized tax benefit
liabilities, our effective tax rate in
a given financial statement period
could be materially affected. An
unfavorable tax settlement would
require use of our cash and result
in an increase in our effective tax
rate in the period of resolution. A
favorable tax settlement would be
recognized as a reduction in our
effective tax rate in the period of
resolution.
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