Income Taxes |
9 Months Ended | ||
|---|---|---|---|
Sep. 30, 2011 | |||
| Income Taxes |
Income
taxes are accounted for under the asset and liability
method. Deferred tax assets and liabilities are
recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases, and
operating loss and tax credit carryforwards. Deferred
tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date. Due to the
uncertainty surrounding the realization of the deferred tax assets
in future tax returns, all of the deferred tax assets have been
fully offset by a valuation allowance at September 30,
2011. We believe we will be subject to paying
alternative minimum tax related to the sale of our GDS Business to
Devicor during the third quarter of 2011. As a result,
we recorded an estimated net tax liability of $270,000 as of
September 30, 2011. Estimated tax liabilities of $5.7
million related to the gain on the sale of discontinued operations
and $1.0 million related to income from discontinued operations
were offset by an estimated tax benefit of $6.4 million related to
the loss from continuing operations.
Current
accounting standards include guidance on the accounting for
uncertainty in income taxes recognized in the financial
statements. Such standards also prescribe a recognition
threshold and measurement model for the financial statement
recognition of a tax position taken, or expected to be taken, and
provides guidance on derecognition, classification, interest and
penalties, accounting in interim periods, disclosure and
transition. The ultimate deductibility of all tax
positions is highly certain, although there is uncertainty about
the timing of such deductibility. As a result, no
liability for uncertain tax positions was recorded as of September
30, 2011 and we do not expect any significant changes in the next
twelve months. Should we need to accrue interest or
penalties on uncertain tax positions, we would recognize the
interest as interest expense and the penalties as a selling,
general and administrative expense.
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