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This excerpt taken from the SII 8-K filed Mar 13, 2009. Income
Taxes
W-H utilizes
the liability method of accounting for income taxes. Under the
liability method, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to
differences between the financial statement carrying values of
existing assets and liabilities and their respective tax bases
based on enacted tax rates.
W-H
recognizes liabilities for anticipated tax issues based on its
estimate of whether, and the extent to which, additional taxes
will be due. These liabilities are adjusted accordingly as
information on the associated tax issues becomes available.
In June 2006, the Financial Accounting Standards Board
(“FASB”) issued FASB Interpretation No. 48,
“Accounting for Uncertainty in Income Taxes”
(“FIN 48”). FIN 48 clarifies the
application of SFAS No. 109, “Accounting for
Income Taxes,” by establishing a threshold condition
that a tax position must meet for any part of the benefit of
that position to be recognized in the financial statements. In
addition to recognition, FIN 48 provides guidance
concerning measurement, recognition, classification and
disclosure of tax positions. FIN 48 is effective for fiscal
years beginning after December 15, 2006; accordingly,
W-H adopted
FIN 48 effective as of January 1, 2007. Upon adoption,
W-H
recognized a cumulative effect adjustment of approximately
$4.1 million as a reduction to retained earnings to
increase the liability for unrecognized tax benefits. See
Note 9 for more information.
In May 2007, the FASB issued FSP
FIN 48-1,
an amendment to FIN 48, which provides guidance on how an
entity is to determine whether a tax position has effectively
settled for purposes of recognizing previously unrecognized tax
benefits. Specifically, this guidance states that an entity
would recognize a benefit when a tax position is effectively
settled using the following criteria: (1) the taxing
authority has completed its examination including all appeals
and administrative reviews; (2) the entity does not plan to
appeal or litigate any aspect of the tax position; and
(3) it is remote that the taxing authority would examine or
reexamine any aspect of the tax position, assuming the taxing
authority has full knowledge of all relevant information
relative to making their assessment on the position.
W-H applied
this guidance in its adoption of FIN 48 and it will
continue to apply this guidance as applicable in future periods.
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