Rosetta Stone 2012 Annual Report Download - page 109
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Table of Contents
From time to time, the Company has been subject to various claims and legal actions in the ordinary course of its business. The Company is not
currently involved in any legal proceeding the ultimate outcome of which, in its judgment based on information currently available, would have a
material impact on its business, financial condition or results of operations.
The following table summarizes the significant components of the Company's deferred tax assets and liabilities as of December 31, 2012 and 2011
(in thousands):
During the quarter ended December 31, 2010, the Company determined that the relative weight of positive and negative evidence supported that it
is more likely than not that the deferred tax assets relating to foreign operations will be realized and accordingly the Company released its valuation
allowance. The Company had evaluated the valuation allowance on its foreign deferred tax assets quarterly prior to making the determination to release
the valuation allowance during the quarter ended December 31, 2010. As of December 31, 2011, the Company had fully utilized the net operating loss
("NOL") carryforwards for U.K. income tax purposes and the NOL carryforwards for Japanese income tax purposes upon which the valuation
allowance had been released.
During the second quarter of 2012, the Company established a full valuation allowance to reduce the deferred tax assets of the Korea subsidiary
resulting in a non-cash charge of $0.4 million. During the third quarter of 2012, the Company established a full valuation allowance to reduce the
deferred
F-32
Deferred tax assets:
Inventory $ 873 $ 478
Amortization and depreciation 7,273 7,710
Net operating loss carryforwards 3,107 1,002
Deferred revenue 2,548 1,826
Accrued liabilities 10,189 9,117
Stock-based compensation 5,613 4,271
Bad debt reserve 441 770
Foreign currency translation 286 77
Foreign and other tax credits 445 1,704
Gross deferred tax assets 30,775 26,955
Valuation allowance (29,671) —
Net deferred tax assets 1,104 26,955
Deferred tax liabilities:
Goodwill and indefinite lived intangibles (8,400) (7,201)
Prepaid expenses (759) (727)
Other (6) (4)
Gross deferred tax liabilities (9,165) (7,932)
Net deferred tax assets (liabilities) $ (8,061) $ 19,023