Express 2012 Annual Report Download - page 62

estimated future tax consequences of temporary differences that currently exist between the tax basis and
financial reporting basis of the Company’s assets and liabilities. Valuation allowances are established against
deferred tax assets when it is more likely than not that the realization of those deferred tax assets will not occur.
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 through continuing operations in the period that includes the enactment date of the change. Changes
in tax laws and rates could affect recorded deferred tax assets and liabilities in the future.
A tax benefit from an uncertain tax position may be recognized when it is more-likely-than-not that the position
will be sustained upon examination, including resolutions of any related appeals or litigation processes, based on
the technical merits. Income tax positions must meet a more-likely-than-not recognition threshold to be
recognized.
The Company recognizes tax liabilities for uncertain tax positions and adjusts these liabilities when the
Company’s judgment changes as a result of the evaluation of new information not previously available. 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 the tax liabilities. These differences will be reflected as increases or
decreases to income tax expense and the effective tax rate in the period in which the new information becomes
available.
Interest and penalties related to unrecognized tax benefits are recognized within income tax expense in the
Consolidated Statements of Income and Comprehensive Income. Accrued interest and penalties are included
within accrued expenses on the Consolidated Balance Sheets.
The income tax liability was $17.2 million and $28.8 million as of February 2, 2013 and January 28, 2012,
respectively, and was included in accrued liabilities on the Consolidated Balance Sheets.
The Company may be subject to periodic audits by the Internal Revenue Service (“IRS”) and other taxing
authorities. These audits may challenge certain of the Company’s tax positions, such as the timing and amount of
deductions and allocation of taxable income to the various jurisdictions.
Self Insurance
The Company is generally self-insured in the United States for medical, workers’ compensation, and general
liability benefits up to certain stop-loss limits. Such costs are accrued based on known claims and estimates of
incurred but not reported (“IBNR”) claims. IBNR claims are estimated using historical claim information and
actuarial estimates. The accrued liability for self insurance is included in accrued expenses on the Consolidated
Balance Sheets.
Foreign Currency Translation
The Canadian dollar is the functional currency for the Canadian business. Assets and liabilities denominated in
foreign currencies were translated into U.S. dollars (the reporting currency) at the exchange rate prevailing at the
balance sheet date. Revenues and expenses denominated in foreign currencies were translated into U.S. dollars at
the monthly average exchange rate for the period. Gains or losses resulting from foreign currency transactions
are included in other expense (income), net whereas related translation adjustments are reported as an element of
other comprehensive income, both of which are included in the Consolidated Statements of Income and
Comprehensive Income.
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