Huawei 2013 Annual Report Download - page 49
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48 Management Discussion and Analysis
The warranty provisions accrued for fiscal years
ended December 31, 2013 and December 31, 2012
were CNY3,491 million and CNY2,844 million,
respectively.
Increases in warranty claims or higher cost of
warranty services will lead to actual warranty
expenses exceeding the accrued warranty
provisions, and will in turn adversely affect the
company’s gross margin.
Income Tax
The company is subject to income taxes in China
and numerous foreign jurisdictions. Significant
judgment is required in determining the
consolidated provision for income taxes.
During the ordinary course of business, there
are many transactions and calculations where
the ultimate tax determination is uncertain. The
company recognizes tax liabilities for anticipated
tax issues based on estimates of whether
additional taxes will eventually be due. The
company adequately accrues for tax liabilities for
all open audit years based on its assessment
of many factors, including past experiences and
interpretations of tax law. Deferred tax assets are
recognized to the extent that future taxable profits
will be available against which the assets can be
utilized.
Assessment of tax exposures and recognition relies
on estimates and assumptions and may involve a
series of complex judgments about future events.
Where the final tax outcome of these future events
is different from the amounts that were initially
recorded, such differences will impact the income
tax and deferred tax provisions for the period in
which such decision is made.