America Online 2009 Annual Report Download - page 30

Table of Contents
We could be subject to additional tax liabilities which could adversely affect our business.
International, federal, state and local tax laws and regulations affecting our business, or interpretations or application of these tax laws and regulations,
could change. In addition, new international, federal, state and local tax laws and regulations affecting our business could be enacted or taxing authorities may
disagree with our interpretation of tax laws and regulations. Our subscription access service is protected from taxation through the Federal Internet Tax Non-
Discrimination Act, which is in effect until November 2014. However, faced with decreasing revenues, several states have sought to increase revenue by
taxing advertising generally, Internet advertising specifically, or by increasing general business taxes. Imposing new taxes on advertising or Internet
advertising would adversely affect us. An increase in general business taxes would adversely affect us if it occurred in a jurisdiction in which we operate.
Other states have sought to expand the definition of "nexus" for the purpose of taxing goods and services sold over the Internet. If enacted, these new taxes
would adversely affect our consumers and, as a result, could adversely affect our business.
We could be required to record significant impairment charges in the future.
We are required under generally accepted accounting principles to test goodwill for impairment at least annually, and to review our identifiable
intangible assets when events or changes in circumstances indicate the carrying value may not be recoverable. Factors that could lead to impairment of
goodwill and identifiable intangible assets include significant adverse changes in the business climate and declines in the value of our business. We recorded a
significant goodwill impairment charge in 2008 and while no goodwill impairment charge was recorded for 2009 as the estimated fair value exceeded the
book value of our sole reporting unit, we may be required to record additional impairment charges (which would reduce our net income) in the future. Our
estimated fair value is primarily based on our market capitalization and volatility in our stock price could have a significant impact on the estimated fair value
of our sole reporting unit. If the estimated fair value of our reporting unit had been hypothetically lower by 5% as of December 31, 2009, the book value
would have exceeded fair value by approximately $70 million, and the second step of the goodwill impairment test would have been required. As of
December 31, 2009, our goodwill totaled $2,184.2 million.
We may be unable to achieve some or all of the benefits that we expect to achieve from our separation from Time Warner.
As an independent, publicly-traded company, we believe that our business benefits from, among other things, allowing us to better focus our financial
and operational resources on our specific business, allowing our management to design and implement corporate strategies and policies that are based
primarily on the business characteristics and strategic decisions of our business, allowing us to more effectively respond to industry dynamics and allowing
the creation of effective incentives for our management and employees that are more closely tied to our business performance. However, we may be more
susceptible to market fluctuations and other adverse events than we would have been were we still a subsidiary of Time Warner. In addition, we may not be
able to achieve some or all of the benefits that we expect to achieve as an independent company in the time we expect, if at all. For example, it is possible that
investors and securities analysts will not place a greater value on our business as an independent company than on our business as a subsidiary of Time
Warner.
We may experience increased costs after the spin-off, as we operate as an independent company.
We have historically operated as part of Time Warner's corporate organization, and Time Warner has assisted us by providing certain corporate
functions. Following the spin-off, Time Warner has no obligation to provide assistance to us other than the interim services to be provided as described in
"Note 13: Related Party Transactions" in our accompanying consolidated financial statements.
Because our business has previously operated as part of the wider Time Warner organization, we may incur additional costs that could adversely affect
our business, as a result of operating independently.
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