CW 2020 Annual Report

The tax effect of temporary differences that gave rise to deferred tax assets and liabilities are as follows (in millions):

As of December 31, 2020

As of December 31, 2019

Deferred tax assets Liabilities Deferred expenditures Employee benefits Tax losses / credits Intangible assets

$

182.1 $

204.0

28.2 88.1 17.4 10.1 225.5 551.4

78.9 82.4

152.7

17.7

Other

3.7

539.4

Less: valuation allowance Total deferred tax assets

(250.9)

(183.5)

$

300.5 $

355.9

Deferred tax liabilities Property, plant and equipment

$

(9.2) $

(14.7)

Intangible assets Income recognition Right-of-use asset

(244.0)

(253.5)

(6.8)

(14.4) (96.7)

(81.2)

Total deferred tax liabilities Total net deferred tax liabilities

(341.2)

(379.3)

$

(40.7) $

(23.4)

The Company had total valuation allowances of $250.9 million and $183.5 million at December 31, 2020 and 2019, respectively, as it was determined that it was more likely than not that certain deferred tax assets may not be realized. These valuation allowances relate to tax loss carryforwards, other tax attributes and temporary differences that are available to reduce future tax liabilities in jurisdictions including but not limited to U.S., U.K., and Australia. The total amount of gross unrecognized tax benefits was $32.4 million and $26.9 million at December 31, 2020 and 2019, respectively. It is reasonably possible that unrecognized tax benefits could change by approximately $9.1 million during the next twelve months. Accrued interest and penalties related to uncertain tax positions are included in the tax provision. The Company accrued interest and penalties of $9.8 million and $8.6 million as of December 31, 2020 and 2019, respectively, net of federal and state income tax benefits as applicable. The provision for income taxes includes expense for interest and penalties (release of interest and penalties) of $1.2 million, $(1.5) million and $1.2 million in 2020, 2019 and 2018 respectively, net of federal and state income tax benefits as applicable. Changes in the Company’s unrecognized tax benefits are (in millions): Year Ended December 31, 2020 Year Ended December 31, 2019 Year Ended December 31, 2018 Beginning of year $ 26.9 $ 23.5 $ 26.3 Increases from prior period tax positions 6.0 5.4 1.3 Decreases from prior period tax positions (0.2) (0.8) (3.0) Decreases from statute of limitation expirations (3.4) — — Increases from current period tax positions 3.6 4.7 0.2 Decreases relating to settlements with taxing authorities (0.5) (5.9) (1.3) End of year $ 32.4 $ 26.9 $ 23.5 The Company is subject to income taxation in various U.S. states and foreign jurisdictions. Generally, the Company’s open tax years include those from 2001 to the present, although audits by taxing authorities for more recent years have been completed or are in process in several jurisdictions. As of December 31, 2020, the Company is under examination in the U.S., U.K., Singapore, Germany, India, China, Australia, Philippines and Thailand.

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