TeleNav 2010 Annual Report Download - page 97

TELENAV, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
indicated that there would be $6.4 million of federal and $6.9 million of California net operating losses that
would expire unused due to the Section 382 limitation. The deferred tax asset amount in the table above excludes
the tax attributes that are not available due to the limitations under Section 382. Our ability to use our net
operating loss carryforwards may be subject to further substantial annual limitation due to future ownership
changes.
As of June 30, 2010, we also have foreign net operating loss carryforwards of $6.3 million, which will
expire beginning in fiscal 2011. Due to uncertainty regarding our ability to utilize the foreign net operating loss
carryforwards, we recorded a full valuation allowance.
On September 30, 2008, the State of California enacted Assembly Bill 1452 into law which, among other
provisions, suspended net operating loss deductions for our fiscal 2009 and 2010, extends for two years the
carryforward period of any net operating losses not utilized due to such suspension, and limits the utilization of
research and development credit carryforwards to no more than 50% of the tax liability before credits. The new
tax law deferred the utilization of our California net operating loss carryforward and $40,000 of our state
research and development credit carryforward.
We adopted the FASB standard for accounting for uncertainty in income taxes at the beginning of fiscal
2010. At the adoption date of July 1, 2009, our cumulative unrecognized tax benefit was $1.1 million, of which
$384,000 was netted against deferred tax assets. As of June 30, 2010, our cumulative unrecognized tax benefit
was $2.9 million, of which $141,000 was netted against deferred tax assets. Upon adoption, we recognized no
adjustment in the liability for unrecognized income tax benefits. During fiscal 2010, the cumulative unrecognized
tax benefit increased by $1.8 million. The following is a tabular reconciliation of the total amounts of
unrecognized tax benefits (in thousands):
June 30, 2010
Unrecognized tax benefit—Beginning ................................................. $1,149
Current year—increase ............................................................. 1,308
Prior year—increase ............................................................... 467
Unrecognized tax benefit—Ending ................................................... $2,924
Included in the balance of unrecognized tax benefits at June 30, 2010 is $2.3 million that, if recognized,
would affect the effective tax rate. We do not believe that the unrecognized tax benefits will materially change in
the next 12 months.
We file income tax returns in the U.S. Internal Revenue Service, or IRS, California and various state and
foreign tax jurisdictions in which we have subsidiaries. Fiscal 2000 through 2010 remain open to examination by
U.S. and state tax authorities, and fiscal 2005 through 2010 remain open to examination by the foreign tax
authorities. The Internal Revenue Service, or IRS, commenced an examination of our U.S. federal income tax
returns for fiscal 2008 and 2009 during fiscal 2010. As of June 30, 2010, the IRS has not formally proposed any
significant adjustments to our tax positions. Management will continuously evaluate the status of the audit,
including any proposed adjustments to determine if it agrees. We do not expect that the results of this
examination will have a material effect on our financial condition or results of operations.
We recognize interest and penalties related to unrecognized tax positions as part of our provision for federal,
state and foreign income taxes. We had accrued $47,000 and $0 for the payment of interest and penalties at
June 30, 2010 and 2009, respectively.
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