TeleNav 2012 Annual Report Download - page 52

Table of Contents
Provision for income taxes . We use the asset and liability method of accounting for income taxes. Under this method, income tax expense is
recognized for the amount of taxes payable or refundable for the current year. In addition, deferred tax assets and liabilities are recognized for the
expected future tax effect of temporary differences between the financial reporting and tax bases of assets and liabilities, and for operating losses and
tax credit carryforwards. We must make assumptions, judgments and estimates to determine our current provision for income taxes and also our
deferred tax assets and liabilities and any valuation allowance to be recorded against a deferred tax asset.
Our assumptions, judgments and estimates relative to the current provision for income taxes take into account current tax laws, our
interpretation of current tax laws and possible outcomes of current and future audits conducted by foreign and domestic tax authorities. We have
established reserves for income taxes to address potential exposures involving tax positions that could be challenged by tax authorities. In addition,
we are subject to the periodic examination of our income tax returns by the Internal Revenue Service, or IRS, and other domestic and foreign tax
authorities. Although we believe our assumptions, judgments and estimates are reasonable, changes in tax laws or our interpretation of tax laws and
the resolution of the current and any future tax audits could significantly impact the amounts provided for income taxes in our consolidated financial
statements.
Our assumptions, judgments and estimates relative to the value of a deferred tax asset take into account predictions of the amount and category
of future taxable income, such as income from operations or capital gains income. In assessing the realizability of deferred tax assets, we consider
whether it is more likely than not that some portion or all of the deferred tax assets, on a jurisdiction by jurisdiction basis, will be realized. Actual
operating results and the underlying amount and category of income in future years could render our current assumptions, judgments and estimates of
recoverable net deferred taxes inaccurate. Any of the assumptions, judgments and estimates mentioned above could cause our actual income tax
obligations to differ from our estimates, thus materially impacting our financial position and results of operations.
Results of operations
The following tables set forth our results of operations for fiscal 2013 , 2012 and 2011
, as well as a percentage that each line item represents of
our revenue for those periods. The period to period comparison of financial results is not necessarily indicative of financial results to be achieved in
future periods. Our press release filed on Form 8-K on July 25, 2013 previously reported cost of product revenue as $37.0 million and cost of service
revenue as $32.1 million for fiscal 2013. The revised numbers are reported below. There was no change to total cost of revenue, gross profit or net
income.
The results of operations of our enterprise business, including the related gain on sale, have been classified as discontinued operations in our
statement of income for all periods presented. The following discussion focuses solely on results of continuing operations.
46
Fiscal Year Ended June 30,
2013 2012 2011
Expected volatility
72
%
64
%
56
%
Expected term (in years)
4.79
4.50
4.50
Risk-free interest rate
0.67
%
0.77
%
1.61
%
Dividend yield
—
—
—