Tucows 2015 Annual Report Download - page 95

Other expenses for Fiscal 2015 primarily consists of interest we incur in connection with our credit facility with
the Bank of Montreal, which decreased by $0.1 million when compared with Fiscal 2014. As the terms of the Joint
Marketing agreement that we entered into in February 2015 when we waived our rights under the proposed joint venture to
operate the .online registry are satisfied, we are recognizing the positive financial contribution from the marketing
agreement during Fiscal 2015. Accordingly, other expenses were partially offset by our recognizing $0.1 million in other
income in accordance with the terms of the .online Joint Marketing agreement.
INCOME TAXES
The following table presents our provision for income taxes for the periods presented:
Year ended December 31,
2015 2014
Provision for income taxes $ 6,569,227 $ 3,054,229
Increase in provision over prior period $ 3,514,998
Increase - percentage 115%
Effective tax rate 36.6% 32.4%
We operate in various tax jurisdictions, and accordingly, our income is subject to varying rates of tax. Losses
incurred in one jurisdiction cannot be used to offset income taxes payable in another jurisdiction. Our ability to use income
tax loss carryforwards and future income tax deductions is dependent upon our operations in the tax jurisdictions in which
such losses or deductions arise. Income taxes are computed using the asset and liability method, under which deferred tax
assets and liabilities are determined based on the difference between the financial statement carrying values and tax base of
assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to affect taxable
income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be
realized.
Fiscal 2015 includes tax on profits of $17.9 million compared to $9.4 million for Fiscal 2014.We had
approximately $0.1 million of total gross unrecognized tax benefit as of December 31, 2015 and as of December 31, 2014,
which if recognized would favorably affect our 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.
A reconciliation of the federal statutory income tax rate to our effective tax rate is set forth in “Note 10 – Income
Taxes” of Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report.
OTHER COMPREHENSIVE INCOME (LOSS)
To mitigate the impact of the change in fair value of our foreign exchange contracts on our financial results, in
October 2012 we begun applying hedge accounting for the majority of the contracts we need to meet our Canadian dollar
requirements on a prospective basis. The impact of the fair value adjustment on outstanding hedged contracts for Fiscal
2015 was a net loss in other comprehensive income of $0.5 million compared to $0.4 million for Fiscal 2014.
The following table presents other comprehensive income for the periods presented:
Year ended December 31,
2015 2014
Comprehensive income $ (487,011) $ (377,460)
Increase over prior period $ (109,551)
Decrease - percentage 29%
Percentage of net revenues (0)% (0)%
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