Express 2015 Annual Report Download - page 33

Table of Contents
  

We are subject to various claims and contingencies
related to legal, regulatory, and other matters arising
out of the normal course of business. Our
determination of the treatment of claims and
contingencies in our Consolidated Financial
Statements is based on management's view of the
expected outcome of the applicable claim or
contingency. Management may also use outside
legal advice on matters related to litigation to assist
in the estimating process.
We accrue a liability if the likelihood of an adverse
outcome is probable and the amount is reasonably
estimable. We re-evaluate these assessments on a
quarterly basis or as new material information
becomes available to determine whether a liability
should be established or if any existing liability
should be adjusted.
We have not made any material changes in the
accounting methodology used to establish our
liability for claims and contingencies over the past
three years.
Our liability for claims and contingencies contains
uncertainties because the eventual outcome will
result from future events. Additionally, the
determination of current accruals requires
estimates and judgments related to future changes
in facts and circumstances, differing
interpretations of the law, assessments of the
amount of damages, and the effectiveness of
strategies and other factors beyond our control.
We have no reason to believe that there will be a
material change in our accrual or the assumptions
we use to establish the accrual for claims and
contingencies. However, if actual results are not
consistent with our estimates or expectations of
the eventual outcomes of cases, we may be
exposed to gains or losses that could be material
and our cash flow could be materially impacted.
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We account for income taxes using the asset and
liability method. Under this method, the amount of
taxes currently payable or refundable is accrued.
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 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.
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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. 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 estimates and judgments
made by management.
We have no reason to believe that our results of
operations will differ materially from our current
expectations. However, if future tax rates are
changed or if actual results are not consistent with
our estimates, we may need to adjust the carrying
value of our deferred tax balances. An increase or
decrease in the valuation allowance would result
in a respective increase or decrease in our effective
tax rate in the period the increase occurs.
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