PolyOne 2009 Annual Report

Description
Income Taxes
• We account for income taxes using the
asset and liability method. Under the asset
and liability method, deferred tax assets
and liabilities are recognized for the
estimated future tax consequences
attributable to differences between the
financial statement carrying amounts of
existing assets and liabilities and their
respective tax bases. In addition, deferred
tax assets are also recorded with respect
to net operating losses and other tax
attribute carryforwards. Deferred tax
assets and liabilities are measured using
enacted tax rates in effect for the year in
which those temporary differences are
expected to be recovered or settled.
Valuation allowances are established when
realization of the benefit of deferred tax
assets is not deemed to be more likely
than not. The effect on deferred tax assets
and liabilities of a change in tax rates is
recognized in income in the period that
includes the enactment date.
• We recognize net tax benefits under the
recognition and measurement criteria of
ASC Topic 740, Income Taxes, which
prescribes requirements and other
guidance for financial statement
recognition and measurement of positions
taken or expected to be taken on tax
returns. We record interest and penalties
related to uncertain tax positions as a
component of income tax expense.
Environmental Liabilities
• Based upon estimates prepared by our
environmental engineers and consultants,
we have $81.7 million accrued at
December 31, 2009 to cover probable
future environmental remediation
expenditures.
Judgments and Uncertainties
• The ultimate recovery of certain of our
deferred tax assets is dependent on the
amount and timing of taxable income that
we will ultimately generate in the future
and other factors such as the
interpretation of tax laws. This means that
significant estimates and judgments are
required to determine the extent that
valuation allowances should be provided
against deferred tax assets. We have
provided valuation allowances as of
December 31, 2009 aggregating $132.9
million against such assets based on our
current assessment of future operating
results and these other factors.
• This accrual represents our best estimate
of the remaining probable remediation
costs based upon information and
technology currently available and our view
of the most likely remedy. Depending upon
the results of future testing, the ultimate
remediation alternatives undertaken,
changes in regulations, new information,
newly discovered conditions and other
factors; it is reasonably possible that we
could incur additional costs in excess of
the amount accrued. However, such
additional costs, if any, cannot currently be
estimated. Our estimate of this liability
may be revised as new regulations or
technologies are developed or additional
information is obtained. Changes during
the past five years have primarily resulted
from an increase in the estimate of future
remediation costs at existing sites and
payments made each year for remediation
costs that were already accrued.
Effect if Actual Results
Differ from Assumptions
• Although management believes that the
estimates and judgments discussed herein
are reasonable, actual results could differ,
which could result in gains or losses that
could be material.
• If further developments or resolution of
these matters are not consistent with our
assumptions and judgments, we may need
to recognize a significant charge in a future
period.
POLYONE CORPORATION
30