Travelzoo 2010 Annual Report Download - page 81

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Operating losses incurred in the foreign subsidiaries were treated as having no recognizable tax benefit.
The tax effects of temporary differences that give rise to significant portions of the Company’s deferred tax
assets and liabilities as of December 31, 2010 and 2009, are as follows (in thousands):
2010 2009
Deferred tax assets:
Foreign net operating loss carryforwards . . . ......................... $6,246 $ 5,799
State income taxes ............................................ 858 102
Accruals and allowances ........................................ 622 352
Capital loss ................................................. 587 1,820
Deferred revenue ............................................. 342 245
Deferred rent ................................................ 279 320
Total deferred tax assets ...................................... 8,934 8,638
Valuation allowance ......................................... (6,833) (7,620)
Total deferred tax assets net of valuation allowance ................ 2,101 1,018
Deferred tax liabilities:
US tax on undistributed earnings.................................. (77) —
Property, equipment and intangible assets ............................. (263) (533)
Total deferred tax liabilities .................................. (340) (533)
Net deferred tax assets ........................................... $1,761 $ 485
The Company has a valuation allowance of approximately $6.2 million as of December 31, 2010 related to
foreign net operating loss carryforwards of approximately $22.3 million for which it is more likely than not that the tax
benefit will not be realized. The Company also has a valuation allowance of $587,000 as of December 31, 2010 related
to the capital loss carryforward of $587,000 for which it is more likely than not that the tax benefit will not be realized.
If not utilized, the capital loss carryforward will expire September 15, 2015. The total amount of the valuation
allowance represented a decrease of approximately $787,000 from the amount recorded as of December 31, 2009 and
was primarily due to a decrease in valuation allowance recorded against the $587,000 capital loss in 2010 offset by an
increase in allowance against the operating loss from Europe.
The Company maintains liabilities for uncertain tax positions. To the extent accrued interest and penalties do
not ultimately become payable, amounts accrued will be reduced and reflected as a reduction in the overall income
tax provision in the period that such determination is made. At December 31, 2010, the Company had
approximately $1.4 million in total unrecognized tax benefits and approximately $83,000 in accrued interest.
The Company has not accrued any penalties related to uncertain tax positions as the Company believes that it is
54
TRAVELZOO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)