Support.com 2008 Annual Report Download - page 79

Table of Contents
SUPPORTSOFT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets and liabilities are as follows (in
thousands):
December 31,
2008 2007
Deferred tax assets:
Accruals and reserves $ 5,313 $ 3,369
Capitalized research and development 3 4
Deferred revenue 625 232
Net operating loss carryforwards 31,057 24,904
Research and development tax credits 4,270 4,147
Capitalized research and development 24 37
Intangible assets 2,860 3,225
Fixed assets 258 338
Gross deferred tax assets 44,410 36,256
Valuation allowance (43,923) (36,005)
Total deferred tax assets 487 251
Deferred tax liabilities:
Intangible assets (595) (501)
Total deferred tax liabilities (595) (501)
Net deferred tax liabilities $ (108) $ (250)
The Financial Accounting Standards Board’s Statement of Financial Accounting Standards No. 109, “Accounting for Income Taxes,” provides for the
recognition of deferred tax assets if realization of such assets is more likely than not to occur. Based upon the weight of available evidence, which includes its
historical operating performance, reported cumulative net losses since inception and difficulty in accurately forecasting its results, the Company provided a full
valuation allowance against its net deferred tax assets. The Company reassesses the need for its valuation allowance on a quarterly basis.
The net valuation allowance increased by approximately $7.8 million, and $8.6 million, during the years ended December 31, 2008, and 2007,
respectively.
As of December 31, 2008, the Company had federal and state net operating loss carryforwards of approximately $81.1 million and $57.7 million,
respectively. The Company also had federal and state research and development credit carryforwards of approximately $2.4 million and $2.5 million,
respectively. The federal net operating loss and credit carryforwards will expire at various dates beginning in 2018 through 2028, if not utilized. The state net
operating loss carryforwards will expire at various dates beginning in 2009 through 2028, if not utilized. The state research and development credit carryforwards
do not have an expiration date.
Utilization of net operating loss carryforwards and credits may be subject to substantial annual limitation due to the ownership change limitations provided
by the Internal Revenue Code of 1986, as amended, and similar state provisions. The annual limitation may result in the expiration of net operating losses and
credits before utilization.
The Company’s India-based subsidiary was granted a tax holiday related to its research and development activities. The tax holiday has been extended and
it expires in March 2010. The tax holiday had an immaterial impact on our 2008 results of operations.
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Source: SUPPORTSOFT INC, 10-K, March 11, 2009