Income Taxes Cash and Cash Equivalents Available-for-Sale

Document Sample
Income Taxes Cash and Cash Equivalents Available-for-Sale Powered By Docstoc

expenditures are probable and that it can reasonably estimate the         already has relationships with whenever possible, diversifying the
cost or a range of costs associated therewith.                            counterparty exposures and restricting the amount held by each
                                                                          counterparty and within the country in total.
Income Taxes
The Company and its domestic subsidiaries file a consolidated             Available-for-Sale Investments
U.S. federal income tax return. The Company’s non-U.S. subsid-            The Company determines the classification of its investments
iaries file income tax returns in their respective local jurisdictions.   at the time of purchase and reassesses it as of each balance sheet
The Company provides for income taxes on those portions of its            date. Available-for-sale securities are marked-to-market based on
foreign subsidiaries’ accumulated earnings that it believes are not       quoted market values of the securities, with the unrealized gains
reinvested indefinitely in their businesses. It is not practicable to     or losses, if any, reported as a component of other comprehensive
estimate the amount of tax that might be payable on the portion           income, net of tax, until realized. The Company recognizes real-
of those accumulated earnings that the Company believes are               ized gains and losses on the sales of the securities on a specific
reinvested indefinitely.                                                  identification method and includes the realized gains or losses in
                                                                          other income, net, in the consolidated statements of operations.
The Company accounts for income taxes under the asset and lia-
                                                                          The Company includes interest and dividends on securities clas-
bility method required by SFAS No. 109, “Accounting for Income
                                                                          sified as available-for-sale in other (expense) income, net, in the
Taxes,” to provide income taxes on all transactions recorded in
                                                                          consolidated statements of operations.
the consolidated financial statements. The Company recognizes
deferred tax assets and liabilities for the future tax consequences       The Company’s available-for-sale investments at December 31,
attributable to differences between the financial statement carry-        2008 and 2007 consisted of auction rate securities, which were
ing amounts of existing assets and liabilities and their respective       classified as non-current assets. The Company accounts for its
tax bases and tax benefit carryforwards. The Company deter-               investments in auction rate securities and reviews them for
mines deferred tax assets and liabilities at the end of each period       impairment in accordance with SFAS No. 115, “Accounting for
using enacted tax rates.                                                  Certain Investments in Debt and Equity Securities,” and other
                                                                          related guidance issued by the FASB and the SEC. See Note 5,
In 2007, the Company adopted the provisions of FIN 48. Under
                                                                          “Available-for-Sale Investments,” for further discussion of the
FIN 48, the Company recognizes the tax benefit from an uncer-
                                                                          Company’s auction rate securities investments.
tain tax position only if it is more likely than not that the tax
position will be sustained on examination by the taxing authori-          Accounts Receivable Securitization
ties, based on the technical merits of the position. The tax bene-        The Company’s two primary U.S. operating subsidiaries are
fits recognized in the financial statements from such positions           party to an accounts receivable securitization program under
are measured based on the largest benefit that has a greater than         which they sell eligible U.S. accounts receivable to an indirectly
fifty percent likelihood of being realized upon settlement with           wholly-owned subsidiary of the Company that was formed for
tax authorities. The Company recognizes interest and penalties            the sole purpose of entering into this program. The wholly-owned
related to unrecognized tax benefits in income tax expense on             subsidiary in turn may sell an undivided ownership interest in
its consolidated statements of operations. See Note 15, “Income           these receivables to a participating bank or an issuer of commer-
Taxes,” for further discussion.                                           cial paper administered by the participating bank. The wholly-
                                                                          owned subsidiary retains the receivables it purchases from the
Cash and Cash Equivalents
                                                                          two operating subsidiaries, except those as to which it sells an
The Company considers highly liquid investments with original
                                                                          interest to a bank or to an issuer of commercial paper. If the
maturities of three months or less at the date of purchase to be
                                                                          wholly-owned subsidiary sells undivided ownership interests in
cash equivalents. The Company’s policy is to invest cash in excess
                                                                          receivables, the Company removes the transferred ownership
of short-term operating and debt service requirements in cash
                                                                          interest amounts from its balance sheet at the time of the sale
equivalents. Cash equivalents are stated at cost, which approxi-
                                                                          and reflects the proceeds from the sale in cash provided by oper-
mates fair value because of the short maturity of the instruments.
                                                                          ating activities in the consolidated statements of cash flows.
The Company’s policy is to transact with counterparties that are
rated at least A– by Standard & Poor’s and A3 by Moody’s. The             The Company reflects retained receivables in receivables, net, on
Company has cash and cash equivalents with counterparties in              its consolidated balance sheets, and the carrying amounts thereof
some countries that are rated below A– or A3. In this case, the           approximate fair value because of the relatively short-term nature
Company tries to minimize its risk by using counterparties it             of the receivables. The Company reflects costs associated with

Sealed Air Corporation 2008 Annual Report