Tucows 2013 Annual Report Download - page 95

Deferred income tax asset, current portion
1,081,526
—
Deferred income tax asset, long-term portion
5,370,037
5,970,462
$
6,451,563
$
5,970,462
Deferred tax liabilities:
Accruals, including foreign exchange and other
$
—
$
(914,429
)
Limited life intangible assets
(301,500
)
(394,100
)
Indefinite life intangible assets
(4,840,000
)
(4,840,000
)
Total deferred tax liabilities
(5,141,500
)
(6,148,529
)
Less deferred tax liability, current portion
—
(914,429
)
Deferred tax liability, long-term portion
$
(5,141,500
)
$
(5,234,100
)
F-22
In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that
some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent
upon the generation of future taxable income during the years in which those temporary differences become deductible.
Management considers projected future taxable income, uncertainties related to the industry in which the Company operates,
and tax planning strategies in making this assessment. During the fourth quarter of 2011 management released its remaining
valuation allowance of $3.6 million.
The Company had approximately $0.1 million of total gross unrecognized tax benefit as of December 31, 2013 and
$0.4 million of total gross unrecognized tax benefit as of December 31, 2012, which if recognized would favorably affect its
income tax rate in future periods. The unrecognized tax benefit relates primarily to prior year Pennsylvania state franchise
taxes and other insignificant U.S. state taxes.
The Company recognizes accrued interest and penalties related to unrecognized tax benefits in tax expense. The
Company did not have any significant interest and penalties accrued as of December 31, 2012 and December 31, 2013.
Tucows believes that it is reasonably possible that $0.1 million of the unrecognized tax benefit will decrease in the
next twelve months as it is anticipated that the foreign tax authorities will finalize their review of prior years’ taxes owing in
Pennsylvania within that period.
The following is a reconciliation of Tucows’ change in uncertain tax position under ASC 740, “Income Taxes”:
Total Gross
Unrecognized
Tax Benefits
Balance as at December 31, 2012
$
382,000
Decrease in uncertain tax benefits of prior years
(265,000
)
Balance as at December 31, 2013
$
117,000
11. Other income, net:
In 2002, various patents which were acquired by us in the merger with Infonautics in 2001 were assigned to an
unrelated third party. In connection with the assignment of these patents, we retained the right to a share of any cash flow
received by the unrelated third party relating to the commercialization of these patents. As a result of this assignment, during
the year ended December 31, 2011 we received an amount of $0.4 million. No amount was received during the years ended
December 31, 2013 and 2012.
In March 2012, we received an amount of $0.5 million on the sale of certain intangible assets with no book value.
F-23
12. Earnings per common share:
The following table reconciles the numerators and denominators of the basic and diluted earnings per common share
computation: