JP Morgan Chase 2014 Annual Report Download - page 167

JPMorgan Chase & Co./2014 Annual Report 165
taxes may materially affect the Firm’s results of operations
in any reporting period.
The Firm’s provision for income taxes is composed of
current and deferred taxes. Deferred taxes arise from
differences between assets and liabilities measured for
financial reporting versus income tax return purposes.
Deferred tax assets are recognized if, in management’s
judgment, their realizability is determined to be more likely
than not. The Firm has also recognized deferred tax assets
in connection with certain NOLs. The Firm performs regular
reviews to ascertain whether deferred tax assets are
realizable. These reviews include management’s estimates
and assumptions regarding future taxable income, which
also incorporates various tax planning strategies, including
strategies that may be available to utilize NOLs before they
expire. In connection with these reviews, if it is determined
that a deferred tax asset is not realizable, a valuation
allowance is established. The valuation allowance may be
reversed in a subsequent reporting period if the Firm
determines that, based on revised estimates of future
taxable income or changes in tax planning strategies, it is
more likely than not that all or part of the deferred tax
asset will become realizable. As of December 31, 2014,
management has determined it is more likely than not that
the Firm will realize its deferred tax assets, net of the
existing valuation allowance.
JPMorgan Chase does not record U.S. federal income taxes
on the undistributed earnings of certain non-U.S.
subsidiaries, to the extent that such earnings have been
reinvested abroad for an indefinite period of time. Changes
to the income tax rates applicable to these non-U.S.
subsidiaries may have a material impact on the effective tax
rate in a future period if such changes were to occur.
The Firm adjusts its unrecognized tax benefits as necessary
when additional information becomes available. Uncertain
tax positions that meet the more-likely-than-not recognition
threshold are measured to determine the amount of benefit
to recognize. An uncertain tax position is measured at the
largest amount of benefit that management believes is
more likely than not to be realized upon settlement. It is
possible that the reassessment of JPMorgan Chase’s
unrecognized tax benefits may have a material impact on its
effective tax rate in the period in which the reassessment
occurs.
For additional information on income taxes, see Note 26.
Litigation reserves
For a description of the significant estimates and judgments
associated with establishing litigation reserves, see
Note 31.