Rosetta Stone 2012 Annual Report Download - page 94
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Table of Contents
When assessing the realization of the Company's deferred tax assets, the Company considers all available evidence, including:
•the nature, frequency, and severity of cumulative financial reporting losses in recent years;
•the carryforward periods for the net operating loss, capital loss, and foreign tax credit carryforwards;
•predictability of future operating profitability of the character necessary to realize the asset;
•prudent and feasible tax planning strategies that would be implemented, if necessary, to protect against the loss of the deferred tax assets;
and
•the effect of reversing taxable temporary differences.
The evaluation of the recoverability of the deferred tax assets requires that the Company weigh all positive and negative evidence to reach a
conclusion that it is more likely than not that all or some portion of the deferred tax assets will not be realized. The weight given to the evidence is
commensurate with the extent to which it can be objectively verified. The more negative evidence that exists, the more positive evidence is necessary and
the more difficult it is to support a conclusion that a valuation allowance is not needed.
The establishment of a valuation allowance has no effect on the ability to use the deferred tax assets in the future to reduce cash tax payments. The
Company will continue to assess the likelihood that the deferred tax assets will be realizable at each reporting period and the valuation allowance will be
adjusted accordingly, which could materially affect the Company's financial position and results of operations.
The Company accounts for its stock-based compensation in accordance ASC topic 718, ("ASC 718").
Under ASC 718, all stock-based awards, including employee stock option grants, are recorded at fair value as of the grant date and recognized as
expense in the statement of operations on a straight-line basis over the requisite service period, which is the vesting period.
Net income (loss) per share is computed under the provisions of ASC topic 260, . Basic income (loss) per share is computed
using net income (loss) and the weighted average number of shares of common stock outstanding. Diluted earnings per share reflect the weighted
average number of shares of common stock outstanding plus any potentially dilutive shares outstanding during the period. Potentially dilutive shares
consist of shares issuable upon the exercise of stock options, restricted stock awards, restricted stock units and conversion of shares of preferred stock.
Common stock equivalent shares are excluded from the diluted computation if their effect is anti-dilutive.
F-17