Rosetta Stone 2013 Annual Report Download - page 98
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Table of Contents
The following table summarizes the significant components of the Company's deferred tax assets and liabilities as of December 31, 2013 and 2012 (in
thousands):
Deferred tax assets:
Inventory
$731
$873
Amortization and depreciation
1,450
7,273
Net operating loss carryforwards
13,461
3,107
Deferred revenue
3,153
2,548
Accrued liabilities
10,308
10,189
Stock-based compensation
5,009
5,613
Bad debt reserve
374
441
Foreign currency translation
341
286
Foreign and other tax credits
1,221
445
Gross deferred tax assets
36,048
30,775
Valuation allowance
(33,866)
(29,671)
Net deferred tax assets
2,182
1,104
Deferred tax liabilities:
Goodwill and indefinite lived intangibles
(9,687)
(8,400)
Prepaid expenses
(2,100)
(759)
Other
(5)
(6)
Gross deferred tax liabilities
(11,792)
(9,165)
Net deferred tax liabilities
$(9,610)
$ (8,061)
On April 1, 2013 and August 1, 2013, the Company acquired all of the outstanding shares of Livemocha and Lexia, respectively. For tax purposes, the
acquisitions will be treated as a non-taxable stock purchase and all of the acquired assets and assumed liabilities will retain their historical carryover tax bases.
Therefore, the Company recognized deferred taxes related to all book/tax basis differences in the acquired assets and liabilities.
In connection with the Livemocha purchase accounting, the Company recognized net deferred tax liabilities of $1.2 million associated with the book/tax
differences on acquired intangible assets and deferred revenue, offset by deferred tax assets associated with acquired net operating loss ("NOL")
carryforwards. The effect of this on the tax provision for the Company resulted in a release of its valuation allowance equal to the amount of the net deferred
tax liability recognized at the time of the Livemocha Merger. Thus, a tax benefit of $1.2 million was recorded during the three months ended June 30, 2013.
During the fourth quarter of 2013, the Company elected to treat the acquisition as an asset acquisition for tax purposes. Accordingly, the Company wrote off
net deferred tax liabilities of $0.9 million against the original net deferred tax liabilities recognized during the three months ended June 30, 2013.
In connection with the Lexia purchase accounting, the Company recognized net deferred tax liabilities of $4.2 million associated with the book/tax
differences on acquired intangible assets and deferred revenue, offset by deferred tax assets associated with acquired net operating loss carryforwards. The
effect of this on the tax provision for the Company resulted in a release of its valuation allowance equal to the amount of the net deferred tax liability recognized
at the time of the Lexia Merger. Thus, a tax benefit of $4.2 million was recorded during the three months ended September 30, 2013.
F-33