Crucial 2012 Annual Report Download - page 293

48
INOTERA MEMORIES, INC.
NOTES TO FINANCIAL STATEMENTS
(Continued)
Under ROC GAAP, in accordance with ROC SFAS 22, there are no differences in the calculation of income
tax provision and the corporate income tax rate of 25% for the year 2009 and 17% for the years 2010 and 2011
are adopted for both periods between annual financial statements and interim quarterly financial statements.
Companies in the ROC are subject to a 10% surtax on profits retained and earned after December 31, 1997.
If the retained profits are distributed in the following year, no 10% surtax is due. Under ROC GAAP, income
tax expense for the 10% surtax is recorded in the statement of operations in the following year if the earnings
are not distributed.
Under ROC GAAP, uncertain tax positions are recognized based on the more likely than not criterion although
for deferred tax assets, a valuation allowance is provided if it is more likely than not that all or some portion
of the asset will not be realized. However, the Company's accounting policy is not to accrue interest and
penalties related to unrecognized tax benefits due to no such requirement under ROC GAAP.
Under U.S. GAAP,. a valuation allowance is not provided on tax assets to the extent that it is not “more likely
than not” that such deferred tax assets will be realized. Also, if a company has experienced cumulative losses
in recent years, it is not generally able to consider projections of future operating profits for the purpose of
determining the valuation allowance for deferred income tax assets. Management considered that the
cumulative losses in recent years is a significant piece of negative evidence that could not be overcome.
Consequently, a valuation allowance was recognized for all of the deferred tax assets at December 31, 2011.
Under U.S. GAAP, income tax expense related to the 10% retained profit tax is recorded in the statement of
operations in the year that the profits were earned. The income tax expense, including the tax effects of
temporary differences, is measured by using the rate that includes the estimated tax on undistributed earnings.
The tax rate used by the Company to measure its deferred taxes under U.S. GAAP was 27.2% for the year of
2009, and 24.47% for the years from and after 2010
Under US GAAP, an entity recognizes in the financial statements the impact of a tax position, if that position
is more likely than not of being sustained upon examination, based on the technical merits of the position. The
Company's accounting policy is to accrue interest and penalties related to unrecognized tax benefits, if and
when required, as a component of general and administrative expenses in the consolidated statements of
income.
(l) Deferred charge
Under ROC GAAP, transaction costs are deducted from the initial measurement of financial instruments that
are not measured at fair value through profit or loss. Transaction costs are those incremental costs directly
attributable to acquiring or issuing a financial instrument, and exclude internal administrative or holding costs.