World Fuel Services 2013 Annual Report Download - page 61

Revenues and expenses of the subsidiaries that have a functional currency other than the U.S. dollar have been translated into U.S.
dollars at average exchange rates prevailing during the period. The assets and liabilities of these subsidiaries have been translated at
the rates of exchange on the balance sheet dates. The resulting translation gain and loss adjustments are recorded in accumulated
other comprehensive income as a separate component of shareholders’ equity. We recorded net foreign currency translation
adjustment losses of $13.2 million, $9.6 million and $11.3 million in 2013, 2012 and 2011, respectively. Cumulative foreign currency
translation adjustments included in accumulated other comprehensive income amounted to losses of $29.3 million and $16.1 million
as of December 31, 2013 and 2012, respectively.
Income Taxes
Income taxes are accounted for under the asset and liability method. Under this method, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing
assets and liabilities and their respective tax bases, and operating loss and income tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted income tax rates expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in income tax rates is
recognized in the income tax provision in the period that includes the enactment date.
We must assess the likelihood that our deferred tax assets will be recovered from our future taxable income, and to the extent we
believe that recovery is not likely, we must establish a valuation allowance against those deferred tax assets. Deferred tax liabilities
generally represent items for which we have already taken a deduction in our income tax return, but we have not yet recognized the
items as expenses in our results of operations.
Significant judgment is required in evaluating our tax positions, and in determining our provisions for income taxes, our deferred tax
assets and liabilities and any valuation allowance recorded against our net deferred tax assets. We establish reserves when, despite
our belief that the income tax return positions are fully supportable, certain positions are likely to be challenged and we may ultimately
not prevail in defending those positions.
U.S. income taxes have not been recognized on undistributed earnings of foreign subsidiaries. Our intention is to reinvest these
earnings permanently in active non-U.S. business operations. Therefore, no income tax liability has been accrued for these earnings.
Because of the availability of U.S. foreign tax credits, it is not practicable to determine the amount of U.S. income tax payable if such
earnings are not reinvested indefinitely.
Earnings per Common Share
Basic earnings per common share is computed by dividing net income attributable to World Fuel and available to common
shareholders by the sum of the weighted average number of shares of common stock, stock units, restricted stock entitled to
dividends not subject to forfeiture and vested RSUs outstanding during the period. Diluted earnings per common share is computed by
dividing net income attributable to World Fuel and available to common shareholders by the sum of the weighted average number of
shares of common stock, stock units, restricted stock entitled to dividends not subject to forfeiture and vested RSUs outstanding
during the period and the number of additional shares of common stock that would have been outstanding if our outstanding
potentially dilutive securities had been issued. Potentially dilutive securities include restricted stock subject to forfeitable dividends,
non-vested RSUs and SSAR Awards. The dilutive effect of potentially dilutive securities is reflected in diluted earnings per common
share by application of the treasury stock method. Under the treasury stock method, an increase in the fair market value of our
common stock can result in a greater dilutive effect from potentially dilutive securities.
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