United Healthcare 2013 Annual Report Download - page 61

Income Taxes
Our provision for income taxes, deferred tax assets and liabilities, and uncertain tax positions reflect our
assessment of estimated future taxes to be paid on items in the consolidated financial statements.
Deferred income taxes arise from temporary differences between financial reporting and tax reporting bases of
assets and liabilities, as well as net operating loss and tax credit carryforwards for tax purposes. We have
established a valuation allowance against certain deferred tax assets for which it is more-likely-than-not that
some portion, or all, of the deferred tax asset will not be realized.
An uncertain tax position is recognized when it is more likely than not that the position will be sustained upon
examination, including resolutions of any related appeals or litigation processes, based on the technical merits.
We prepare and file tax returns based on our interpretation of tax laws and regulations and record estimates based
on these judgments and interpretations. In the normal course of business, our tax returns are subject to
examination by various taxing authorities. Such examinations may result in future tax and interest assessments by
these taxing authorities. Inherent uncertainties exist in estimates of tax positions due to changes in tax law
resulting from legislation, regulation and/or as concluded through the various jurisdictions’ tax court systems.
The significant assumptions and estimates described above are important contributors to our ultimate effective
tax rate in each year. A hypothetical increase or decrease in our effective tax rate by 1% on our 2013 earnings
before income taxes would have caused the provision for income taxes and net earnings to change by $89
million.
Contingent Liabilities
Because of the nature of our businesses, we are routinely involved in various disputes, legal proceedings and
governmental audits and investigations. We record liabilities for our estimates of the probable costs resulting
from these matters where appropriate. Our estimates are developed in consultation with legal counsel, if
appropriate, and are based upon an analysis of potential results, assuming a combination of litigation and
settlement strategies and considering our insurance coverage, if any, for such matters.
Estimates of costs resulting from legal and regulatory matters are inherently difficult to predict, particularly
where the matters: involve indeterminate claims for monetary damages or may involve fines, penalties or
punitive damages; present novel legal theories or represent a shift in regulatory policy; involve a large number of
claimants or regulatory bodies; are in the early stages of the proceedings; or could result in a change in business
practices. Accordingly, in many cases, we are unable to estimate the losses or ranges of losses for those matters
where there is a reasonable possibility or it is probable that a loss may be incurred. Similarly, the assessment of
the likelihood of assertion of unasserted claims involves significant judgment.
Given this inherent uncertainty, it is possible that future results of operations for any particular quarterly or
annual period could be materially affected by changes in our estimates or assumptions. We evaluate our related
disclosures in each reporting period. See Note 12 of Notes to the Consolidated Financial Statements included in
Item 8, “Financial Statements” for a discussion of specific legal proceedings including an assessment of whether
a reasonable estimate of the losses or range of loss could be determined.
LEGAL MATTERS
A description of our legal proceedings is presented in Note 12 of Notes to the Consolidated Financial Statements
included in Item 8, “Financial Statements.”
CONCENTRATIONS OF CREDIT RISK
Investments in financial instruments such as marketable securities and accounts receivable may subject us to
concentrations of credit risk. Our investments in marketable securities are managed under an investment policy
59