Overstock.com 2015 Annual Report Download - page 30

mix of jurisdictions to which they relate, changes in how we do business, changes in law, regulations, and administrative practices, and relative changes of
expenses or losses for which tax benefits are not recognized. Additionally, our effective tax rate can be more or less volatile based on the amount of pre-tax
income. For example, the impact of discrete items and non-deductible expenses on our effective tax rate is greater when our pre-tax income is relatively low.
Changes in state, federal, and foreign tax laws may increase our tax contingencies. The timing of the resolution of income tax examinations is highly
uncertain, and the amounts ultimately paid, if any, upon resolution of the issues raised by the taxing authorities may differ from the amounts accrued. It is
reasonably possible that within the next 12 months we will receive assessments by various tax authorities or possibly reach resolution of income tax
examinations in one or more jurisdictions. These assessments or settlements may result in changes to our contingencies related to positions on prior years’ tax
filings. The volatility of our quarterly tax provision or the resolution of matters related to our tax contingencies could have a material adverse effect on our
financial results.


From our inception to December 31, 2013, we established a valuation allowance for our deferred tax assets, primarily due to realized losses and
uncertainty regarding our future taxable income. Determining whether a valuation allowance for deferred tax assets is appropriate requires significant
judgment and an evaluation of all positive and negative evidence. At each reporting period, we assess the need for, or the sufficiency of, a valuation
allowance against deferred tax assets. At December 31, 2013, based on the weight of all the positive and negative evidence, we concluded that it was more
likely than not that we will realize our net deferred tax assets based upon future taxable income. Therefore we reversed the valuation allowance at December
31, 2013.
Our conclusion at December 31, 2013 that it is more likely than not that we will realize our net deferred tax assets was based primarily on our
estimate of future taxable income. Our estimate of future taxable income is based on internal projections which primarily consider historical performance, but
also include various internal estimates and assumptions as well as certain external data. We believe all of these inputs to be reasonable, although inherently
subject to significant judgment. If actual results differ significantly from these estimates of future taxable income, we may need to reestablish a valuation
allowance for some or all of our deferred tax assets. Establishing an allowance on our net deferred tax assets could have a material adverse effect on our
financial condition and operating results.


At December 31, 2015 our investment in precious metals was $9.7 million. Our financial results may be adversely affected by declines in the price of
precious metals. The prices of precious metals may fluctuate widely in the future and are affected by numerous factors beyond our control such as interest
rates, exchange rates, inflation or deflation, fluctuation in the value of the United States dollar and foreign currencies, global and regional supply and
demand, and the political and economic conditions of mineral producing countries throughout the world. Our investment consists of actual precious metals,
rather than financial instruments. We store our precious metals off-site in a third party facility. Consequently, we are subject to the risks of physical storage
with a third party that we do not control. Any loss of these assets or substantial decline in their value could have a material adverse effect on our business.

In January 2014, we began accepting bitcoins as a form of payment for purchases on our website. Bitcoin is a cryptocurrency that uses cryptography
to control the creation and transfer of the currency between individual parties. Bitcoin is not considered legal tender or backed by any government. Since
inception in 2009, bitcoins have experienced price volatility, technological glitches and various law enforcement and regulatory interventions. At present we
do not accept bitcoin payments directly, but use a third party vendor to accept bitcoin payments on our behalf. That third party vendor then immediately
converts the bitcoin payments into U.S. dollars so that we receive payment for the product sold at the sales price in U.S. dollars.
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