Western Union 2010 Annual Report Download - page 66

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Critical Accounting Policies and Estimates
Management’s discussion and analysis of results of operations and financial condition is based on our financial
statements that have been prepared in accordance with accounting principles generally accepted in the United
States. The preparation of these financial statements requires that management make estimates and assumptions
that affect the amounts reported for revenues, expenses, assets, liabilities and other related disclosures. Actual
results may or may not differ from these estimates. Our significant accounting policies are discussed in Note 2,
Summary of Significant Accounting Policies, of the notes to consolidated financial statements, included in Item 8,
Financial Statements and Supplementary Data.
Our critical accounting policies and estimates, described below, are very important to the portrayal of our
financial position and our results of operations and applying them requires our management to make difficult,
subjective and complex judgments. We believe that the understanding of these key accounting policies and
estimates is essential in achieving more insight into our operating results and financial condition.
Description Judgments and Uncertainties
Effect if Actual Results Differ from
Assumptions
Income Taxes
Reinvestment of foreign earnings
Income taxes, as reported in our
consolidated financial statements,
represent the net amount of
income taxes we expect to pay to
various taxing jurisdictions in
connection with our operations.
We provide for income taxes
based on amounts that we believe
we will ultimately owe after
applying the required analyses and
judgments.
With respect to earnings in certain
foreign jurisdictions, we have
provided for income taxes on such
earnings at a more favorable
income tax rate than the combined
United States federal and state
income tax rates because we
expect to reinvest these earnings
outside of the United States
indefinitely.
At December 31, 2010, no
provision had been made for
United States federal and state
income taxes on foreign earnings
of approximately $2.5 billion,
which are expected to be
reinvested outside the United
States indefinitely.
Upon distribution of those
earnings to the United States in
the form of actual or constructive
dividends, we would be subject to
United States income taxes
(subject to an adjustment for
foreign tax credits), state income
taxes and possible withholding
taxes payable to various foreign
countries which could result in a
material impact to our financial
position, results of operations and
cash flows in the period such
distribution occurred.
Determination of the amount of
unrecognized deferred United
States tax liability is not
practicable because of the
complexities associated with its
hypothetical calculation.
64