World Fuel Services 2013 Annual Report Download - page 80

In addition, as a result of certain realization requirements of accounting guidance on stock compensation, the table of deferred tax
assets and liabilities shown above does not include certain deferred tax assets as of December 31, 2013 and 2012 that arose directly
from income tax deductions related to equity compensation in excess of compensation recognized for financial reporting. As of
December 31, 2013 and 2012, we had no foreign tax credits related to the excess stock compensation deductions that resulted in an
income tax deduction or credit before the realization of the income tax benefit from the deduction or credit. We use the ‘‘with and
without’’ method for purposes of determining when excess income tax benefits have been realized.
As of December 31, 2013, 2012 and 2011, our annual capital in excess of par value pool of windfall income tax benefits related to
employee compensation was estimated to be $3.3 million, $3.7 million and $6.0 million, respectively.
We operated under a special income tax concession in Singapore which was effective from January 1, 2008 through December 31,
2012. In March 2013, we received final approval that we were awarded an additional five year special income tax concession in
Singapore beginning January 1, 2013. The special income tax concession is conditional upon our meeting certain employment and
investment thresholds which, if not met in accordance with our agreement, may eliminate the benefit beginning with the first year in
which the conditions are not satisfied. The income tax concession reduces the income tax rate on qualified sales and the impact of this
income tax concession decreased foreign income taxes by $6.2 million, $5.5 million and $8.4 million for 2013, 2012 and 2011,
respectively. The impact of the income tax concession on diluted earnings per common share was $0.09 for 2013, $0.08 for 2012 and
$0.12 for 2011.
Income Tax Contingencies
We recorded an increase of $4.1 million of liabilities related to unrecognized income tax benefits (‘‘Unrecognized Tax Liabilities’’) and
an increase of $1.8 million of assets related to unrecognized income tax benefits (‘‘Unrecognized Tax Assets’’) during 2013. In addition,
during 2013, we recorded a decrease of $0.1 million to our Unrecognized Tax Liabilities related to a foreign currency translation gain,
which is included in other (expense) income, net, in the accompanying consolidated statements of income and comprehensive
income. As of December 31, 2013, our Unrecognized Tax Liabilities were $36.2 million and our Unrecognized Tax Assets were
$6.9 million.
We recorded a decrease of $5.6 million of liabilities related to Unrecognized Tax Liabilities and a decrease of $1.7 million of assets
related to Unrecognized Tax Assets during 2012. In addition, during 2012, we recorded a decrease of $0.1 million to our Unrecognized
Tax Liabilities related to a foreign currency translation loss, which is included in other (expense) income, net, in the accompanying
consolidated statements of income and comprehensive income. As of December 31, 2012, our Unrecognized Tax Liabilities were
$33.0 million and our Unrecognized Tax Assets were $5.1 million.
The following is a tabular reconciliation of the total amounts of unrecognized income tax benefits for the year:
2013 2012 2011
Unrecognized tax benefit – opening balance $22,394 $25,574 $26,293
Gross increases – tax positions in prior period 2,559 — —
Gross decreases – tax positions in prior period (39) (7,659) —
Gross increases – tax positions in current period 4,999 5,730 5,890
Gross decreases – tax positions in current period — — (64)
Settlements — — (62)
Lapse of statute of limitations (3,426) (1,251) (6,483)
Unrecognized tax benefit – ending balance $26,487 $22,394 $25,574
If our uncertain tax positions as of December 31, 2013 are settled by the taxing authorities in our favor, our income tax expense would
be reduced by $20.1 million (exclusive of interest and penalties) in the period the matter is considered settled in accordance with
Accounting Standards Codification 740. This would have the impact of reducing our 2013 effective income tax rate by 8.2%. As of
December 31, 2013, it does not appear that the total amount of our unrecognized income tax benefits will significantly increase or
decrease within the next twelve months.
We record accrued interest and penalties related to unrecognized income tax benefits as income tax expense. Related to the uncertain
income tax benefits noted above, for interest we recorded income of $0.6 million, $0.7 million and $0.6 million during 2013, 2012 and
2011, respectively. For penalties, we recorded income of $0.3 million and $1.5 million and expense of $0.2 million during 2013, 2012
and 2011, respectively. As of December 31, 2013 and 2012, we had recognized liabilities of $4.9 million and $5.5 million for interest
and $4.8 million and $5.1 million for penalties, respectively.
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