2007 Annual Report - Ameristar Casinos, Inc.

Income TaxesOur income tax returns are subject to examination by the Internal Revenue Service (“IRS”) and other taxauthorities in the locations where we operate. We assess potentially unfavorable outcomes of such examinationsbased on the criteria of FIN 48, which we adopted on January 1, 2007. FIN 48 prescribes a minimum recognitionthreshold a tax position is required to meet before being recognized in the financial statements. As a result, ourincome tax recognition policy related to uncertain income tax positions is no longer covered by SFAS No. 5. FIN 48applies to all tax positions related to income taxes subject to SFAS No. 109. FIN 48 utilizes a two-step approach forevaluating tax positions. Recognition (Step I) occurs when we conclude that a tax position, based on its technicalmerits, is more likely than not to be sustained upon examination. Measurement (Step II) is only addressed if theposition is deemed to be more likely than not to be sustained. Under Step II, the tax benefit is measured as thelargest amount of benefit that is more likely than not to be realized upon settlement. FIN 48’s use of the term “morelikely than not” is consistent with how that term is used in SFAS No. 109 (i.e., the likelihood of occurrence isgreater than 50%).The tax positions failing to qualify for initial recognition are to be recognized in the first subsequent interimperiod that they meet the “more likely than not” standard. If it is subsequently determined that a previouslyrecognized tax position no longer meets the “more likely than not” standard, it is required that the tax position bederecognized. FIN 48 specifically prohibits the use of a valuation allowance as a substitute for derecognition of taxpositions. As applicable, we will recognize accrued penalties and interest related to unrecognized tax benefits in theprovision for income taxes.Recently Issued Accounting StandardsSFAS No. 157In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements,” which defines fair value,establishes a framework for measuring fair value in generally accepted accounting principles and expandsdisclosures about fair value measurements. SFAS No. 157 clarifies how to measure fair value as permitted underother accounting pronouncements, but does not require any new fair value measurements. We adopted SFAS No.157 as of January 1, 2008. The adoption of SFAS No. 157 is not expected to have a material impact on our financialposition, results of operations or cash flows.SFAS No. 159In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and FinancialLiabilities Including an Amendment of FASB Statement No. 115.” SFAS No. 159 permits entities to choose tomeasure many financial instruments and certain other items at fair value, with unrealized gains and losses related tothese financial instruments reported in earnings at each subsequent reporting date. SFAS No. 159 is effective forfiscal years beginning after November 15, 2007. The adoption of SFAS No. 159 is not expected to have a materialimpact on our financial position, results of operations or cash flows.SFAS No. 141(R)In December 2007, the FASB issued SFAS No. 141 (Revised 2007), “Business Combinations” (“SFAS No.141(R)”). SFAS No. 141(R) will significantly change the accounting for business combinations. Under SFAS No.141(R), an acquiring entity will be required to recognize all the assets acquired and liabilities assumed in atransaction at the acquisition-date fair value with limited exceptions. SFAS No. 141(R) will change the accountingtreatment for certain specific acquisition-related items, including: (1) expensing acquisition-related costs as incurred;(2) valuing noncontrolling interests at fair value at the acquisition date; and (3) expensing restructuring costsassociated with an acquired business. SFAS No. 141(R) also includes a substantial number of new disclosurerequirements. SFAS No. 141(R) is to be applied prospectively to business combinations for which the acquisitiondate is on or after January 1, 2009. We expect SFAS No. 141(R) will have an impact on our accounting for futurebusiness combinations once adopted but the effect is dependent upon the acquisitions, if any, that are made in thefuture.52