Rosetta Stone 2014 Annual Report Download - page 92

Table of Contents



In connection with the Vivity purchase accounting, the Company recognized net deferred tax liabilities of $0.9 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.
In connection with the Tell Me More purchase accounting, the Company recognized net deferred tax liabilities of $1.4 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.
For the year ended December 31, 2014, the Company recorded an income tax benefit of $6.5 million primarily resulting from the tax benefits related to
the goodwill impairment taken during the first quarter of 2014 related to the ROW Consumer reporting unit, the goodwill impairment taken during the fourth
quarter of 2014 related to the North America Consumer Language reporting unit, and current year losses in Canada and France. The goodwill that was
impaired related to acquisitions from prior years, a portion of which resulted in a tax benefit as a result of writing off a deferred tax liability previously
recorded (i.e., goodwill had tax basis and was amortized for tax). In the current year, these tax benefit amounts were partially offset by income tax expense
related to current year profits from certain foreign operations and foreign withholding taxes. The tax benefit was also partially offset by the tax expense
related to the tax impact of the amortization of indefinite lived intangibles, and the inability to recognize tax benefits associated with current year losses of
operations in all other foreign jurisdictions and in the U.S. due to the valuation allowance recorded against the deferred tax asset balances of these entities.
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
tax assets of its operations in Brazil, Japan, and the U.S., resulting in a non-cash charge of $0.4 million, $2.1 million, and $23.1 million, respectively.
Additionally, no tax benefits were provided on 2012 losses incurred in foreign jurisdictions where the Company has determined a valuation allowance is
required. As of December 31, 2012, a full valuation allowance was provided for domestic and certain foreign deferred tax assets in those jurisdictions where
the Company has determined the deferred tax assets will more likely than not be realized.
If future events change the outcome of the Company's projected return to profitability, a valuation allowance may not be required to reduce the
deferred tax assets. The Company will continue to assess the need for a valuation allowance.
As of December 31, 2014, the Company had federal, state and foreign tax NOL carryforward amounts and expiration periods as follows (in thousands):











2015-2019
$ —
$ 481
$ —
$ —
$ —
$ —
$ —
$ 481
2020-2024
—
803
—
—
10,932
5,978
740
18,453
2025-2029
—
3,623
—
—
—
4,042
92
7,757
2030-2034
21,700
16,066
—
—
—
—
865
38,631
2035-2039
17,892
14,582
—
—
—
—
39
32,513
Indefinite
—
—
6,244
9,943
—
—
—
16,187
Totals
$ 39,592
$ 35,555
$ 6,244
$ 9,943
$ 10,932
$ 10,020
$ 1,736
$ 114,022
As of December 31, 2014, our federal tax credit carryforward amounts and expiration periods were as follows (in thousands):
F-35