Travelzoo 2015 Annual Report Download - page 91

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Income Taxes
We are subject to income taxes in the U.S. and numerous foreign jurisdictions. Significant judgment is required in
evaluating our uncertain tax positions and determining our provision for income taxes. Although we believe we have
adequately reserved for our uncertain tax positions, no assurance can be given that the final tax outcome of these matters will
not be different. We adjust these reserves in light of changing facts and circumstances, such as the progress or closing of a tax
audit or the refinement of an estimate. To the extent that the final tax outcome of these matters is different than the amounts
recorded, such differences will impact the provision for income taxes in the period in which such determination is made. The
provision for income taxes includes the impact of reserve provisions and changes to reserves that are considered appropriate, as
well as the related net interest.
Our effective tax rates have differed from the statutory rate primarily due to the tax impact of foreign operations, state
taxes, certain benefits realized related to stock option activities, the extent that our earnings are indefinitely reinvested outside
the U.S. and tax asset valuation allowance determinations, including on certain loss carryforwards. For the years ended
December 31, 2015, 2014 and 2013, our effective tax rates were (84)%, 27% and 679%, respectively. Our future effective tax
rates could be materially impacted by earnings being lower than anticipated in countries where we have lower statutory rates
and higher than anticipated in countries where we have higher statutory rates, changes in the deferred tax assets or liabilities,
changes in tax asset valuation allowance determinations, changes in our judgment about whether certain foreign earnings are
indefinitely reinvested outside the U.S., or changes in tax laws, regulations, and accounting principles. In addition, we are
subject to the continuous examination of our income tax returns by the IRS and other tax authorities. We regularly assess the
likelihood of adverse outcomes resulting from these examinations to determine the adequacy of our provision for income taxes.
See Note 6 to the accompanying consolidated financial statements for further information.
Loss Contingencies
We are involved in claims, suits, and proceedings arising from the ordinary course of our business. We record a provision
for a liability when we believe that it is both probable that a liability has been incurred, and the amount can be reasonably
estimated. Significant judgment is required to determine both probability and the estimated amount. Such claim proceedings
are inherently unpredictable and subject to significant uncertainties, some of which are beyond our control. Should any of these
estimates and assumptions change or prove to have been incorrect, it could have a material impact on our results of operations,
financial position and cash flows. We have several known loss contingencies such as our liability to former stockholders of
Travelzoo.com Corporation that may be realized as a result of our cash program for these claimants and the 2009 IRS audit
claims. Please refer to Note 5 and 6 to the accompanying consolidated financial statements for further information regarding
our loss contingencies.
Recent Accounting Pronouncements
See “Note 1 — Summary of Significant Accounting Policies” to the accompanying consolidated financial statements
included in this report, regarding our significant accounting policies and any impact of certain recent accounting
pronouncements on our consolidated financial statements.