Rosetta Stone 2012 Annual Report Download - page 111
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Table of Contents
Reconciliation of income tax provision (benefit) computed at the U.S. federal statutory rate to income tax expense is as follows (in thousands):
The Company accounts for uncertainty in income taxes under ASC topic 740-10-25, ("ASC 740-10-25").
ASC 740-10-25 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position
taken or expected to be taken in a tax return. ASC 740-10-25 also provides guidance on de-recognition, classification, interest and penalties, accounting
in interim periods, disclosure, and transition.
The Company recognizes interest and penalties related to unrecognized tax benefits as a component of income tax expense. As of December 31,
2012, the Company had $9,000 accrued for interest and penalties in "Other Long Term Liabilities". During the year ended December 31, 2012, the
Company accrued $42,000 of interest expense and paid $57,000 as settlement of its Japan audit.
A reconciliation of the beginning and ending amount of unrecognized tax benefits, excluding interest and penalties, is as follows (in thousands):
During the year ended December 31, 2012, the Company recognized $239,000 for unrecognized tax benefits and paid $261,000 as settlement of its
Japan audit for the tax years 2008, 2009, and 2010. These liabilities for unrecognized tax benefits are included in "Other Long Term Liabilities". As of
December 31, 2012 and 2011, the Company had $143,000 and $165,000 of unrecognized tax benefits,
F-34
Income tax expense at statutory federal rate $ (2,044) $ (9,789) $ 4,506
State income tax expense, net of federal income tax effect 216 (869) 229
Domestic production activities deduction (81) 580 (315)
Nondeductible LTIP expense — 2,062 —
Nondeductible intercompany interest — 29 134
Other nondeductible expenses 504 698 161
Tax rate differential on foreign operations (340) (206) 16
Increase (decrease) in valuation allowance 29,775 — (4,872)
Tax Audit Settlements 281 — —
Change in prior year estimates 1,608 — —
Other tax credits — (619) —
Other 72 134 (270)
Income tax expense (benefit) $ 29,991 $ (7,980) $ (411)
Balance at January 1, $ 165 —
Increases for tax positions taken during prior period — —
Increases for tax positions taken during current period 239 165
Settlements (261) —
Balance at December 31, $ 143 $ 165