SEC Filings

10-Q
TIME WARNER INC. filed this Form 10-Q on 08/02/2017
Entire Document
 


Table of Contents

TIME WARNER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

 

The Company establishes an accrued liability for legal claims when the Company determines that a loss is both probable and the amount of the loss can be reasonably estimated. Once established, accruals are adjusted from time to time, as appropriate, in light of additional information. The amount of any loss ultimately incurred in relation to matters for which an accrual has been established may be higher or lower than the amounts accrued for such matters.

The Company has estimated a range of possible loss for legal claims for which the Company has determined a loss is probable or reasonably possible, including the matter disclosed above. The Company believes the estimate of the aggregate range of possible loss for such matters in excess of accrued liabilities is between $0 and $100 million at June 30, 2017. The estimated aggregate range of possible loss is subject to significant judgment and a variety of assumptions. The matters represented in the estimated aggregate range of possible loss will change from time to time and actual results may vary significantly from the current estimate.

In view of the inherent difficulty of predicting the outcome of litigation and claims, the Company often cannot predict what the eventual outcome of the pending matters will be, what the timing of the ultimate resolution of these matters will be, or what the eventual loss, fines or penalties related to each pending matter may be. An adverse outcome in one or more of these matters could be material to the Company’s results of operations or cash flows for any particular reporting period.

Income Tax Uncertainties

During the six months ended June 30, 2017, the Company recorded net increases to income tax reserves of approximately $11 million. Increases to income tax reserves of approximately $18 million impacted the Company’s effective tax rate. During the six months ended June 30, 2017, the Company recorded net increases to interest reserves related to the income tax reserves of approximately $27 million.

In the Company’s judgment, uncertainties related to certain tax matters are reasonably possible of being resolved during the next twelve months. The effect of such resolution, which could vary based on the final terms and timing of actual settlements with taxing authorities, is estimated to be a reduction of recorded unrecognized tax benefits ranging from $0 to $270 million, which would decrease the Company’s effective tax rate.

 

15.

RELATED PARTY TRANSACTIONS

The Company has entered into certain transactions in the ordinary course of business with unconsolidated investees accounted for under the equity method of accounting. The transactions that generate revenue and expenses primarily relate to the licensing by the Warner Bros. segment of content to The CW broadcast network, Hulu and certain international networks, including networks owned by CME. Transactions that generate interest income and other income primarily relate to financing transactions with CME. Receivables due from related parties were $430 million and $265 million at June 30, 2017 and December 31, 2016, respectively. Payables due to related parties were immaterial at June 30, 2017 and December 31, 2016, respectively. Amounts included in the Consolidated Statement of Operations resulting from transactions with related parties consist of (millions):

 

     Three Months Ended June 30,   Six Months Ended June 30,
     2017   2016   2017   2016

Revenues

   $                 158     $                 116     $                 392     $                 239  

Expenses

     (1     (1     (2     (1

Interest income

     22       27       45       68  

Other income

     3       4       5       9  

 

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