INCOME TAXES

9 Months Ended

Sep. 30, 2011

INCOME TAXES

15. INCOME TAXES

The Company operates in several tax jurisdictions primarily: the United States of America, Poland, Hungary and Russia. All subsidiaries file their own corporate tax returns as well as account for their own deferred tax assets and liabilities. The Company does not file a tax return in the United States of America based upon its consolidated income, but does file a return based on its income taxable in the United States of America. For income taxes accounted for on an interim basis, the Company estimates the annual effective tax rate and applies this rate to its pre-tax US GAAP income/(loss), unless a discrete event occurs that requires additional consideration.

The Company files income tax returns in the U.S., Poland, Hungary, Russia, as well as in various other countries throughout the world in which we conduct our business. The major tax jurisdictions and their earliest fiscal years that are currently open for tax examinations are 2006 in the U.S., Poland and Hungary and 2008 in Russia.

Due to revision of the outlook for the future, in connection with the decline of the spirits market in Poland and Russia, pricing impact from continued growth of discounters and the cannibalization of Premium brands by Mainstream brands resulting in lower margins in Poland, the Company performed an analysis of the recoverability of its deferred tax asset balance related to tax losses carried forward. Based on the analysis the Company recorded full provision for the deferred tax assets in Poland, which was recognized previously in relation to tax losses carried forward. The total deferred tax asset as of September 30, 2011 amounts to $102.7 million in comparison to deferred tax liability of $131.5 million.