TeleNav 2014 Annual Report Download - page 29

Table of Contents
jurisdictions in which we operate, as well as the requirements of certain tax and other accounting body rulings. Since we must estimate our
annual effective tax rate each quarter based on a combination of actual results and forecasted results of subsequent quarters, any significant
change in our actual quarterly or forecasted annual results may adversely impact the effective tax rate for the period. Our estimated annual
effective tax rate may fluctuate for a variety of reasons, including:
Although we believe our estimates are reasonable, the ultimate tax outcome may differ from the amounts recorded in our financial
statements and may materially affect our financial results in the period. In fiscal 2014, we recorded a valuation allowance on the majority of our
deferred tax assets, net of liabilities since the assets are not more likely than not to be realized based upon our assessment of all positive and
negative evidence. Realization of deferred tax assets is dependent upon future taxable earnings, the timing of which is uncertain. Due to losses in
fiscal 2014 and expected losses in fiscal 2015 and potentially future years in the U.S., we established in fiscal 2014 a valuation allowance on
deferred tax assets in the U.S. that we believe will not be realized by the carryback provisions of U.S. tax law. U.S. tax law allows for the two-
year carryback of losses and one
-year carryback of credits to previous tax years which can generate a tax refund to the extent taxes were paid.
Due to foreign operating losses in previous years and continued foreign earnings volatility, we continued to maintain a full valuation allowance
for our foreign deferred tax assets. In fiscal 2015, we expect to realize approximately $1.3 million of U.S. deferred tax assets on the balance
sheet as of June 30, 2014 based upon our ability to carryback losses and credits within the carryback period. In the event deferred tax assets
cannot be realized based upon the ability to carryback losses and credits within the carryback period, our effective tax rate would be negatively
impacted.
Our wireless carrier customers may change the pricing and other terms by which they offer our mobile navigation services, which could
result in increased end user turnover, lower revenue and adverse effects on our business.
Our wireless carrier customers have significant flexibility as to the manner by which our mobile navigation services are distributed by
them. They may bundle the product with other applications or services such as unlimited data plans. Given their flexibility in the future they may
reduce the monthly fees per subscriber that they pay us if their subscribers do not use our services as often as the wireless carriers expect or for
any other reason in order to reduce their costs. Our wireless carrier customers may also decide to raise prices, impose usage caps or discontinue
unlimited data service plans, which could cause our end users who receive our services through those plans to move to a less expensive plan that
does not include our services or terminate their relationship with the wireless carrier. If imposed, these pricing changes or usage restrictions
could make our mobile navigation services less attractive and could result in current end users abandoning our mobile navigation services. If end
user turnover increased, the number of our end users and our revenue would decrease and our business would be harmed. We are also required to
give AT&T certain most favored customer pricing on specified products and in certain markets. In certain circumstances this may require us to
reduce the price per end user under the AT&T contract, which may adversely impact our revenue.
We rely on our customers for timely and accurate subscriber and vehicle sales information. A failure or disruption in the provisioning of this
data to us would materially and adversely affect our ability to manage our business effectively.
We rely on our wireless carrier customers to bill subscribers and collect monthly fees for our mobile navigation services, either directly or
through third party service providers. In addition, we rely on our automotive and OEM customers to provide us with reports on the number of
vehicles they sell with our on-board navigation services included and to remit royalties for those sales to us. If our customers or their third party
service providers provide us with inaccurate data or experience errors or
21
•
changes in forecasted annual operating income or loss by jurisdiction;
•
changes in relative proportions of revenue and income or loss before taxes in the various jurisdictions in which we operate;
•
changes to the valuation allowance on net deferred tax assets;
• changes to actual or forecasted permanent differences between book and tax reporting, including the tax effects of purchase
accounting for acquisitions and non-recurring charges which may cause fluctuations between reporting periods;
•
impacts from any future tax settlements with state, federal or foreign tax authorities;
• impacts from changes in tax laws, regulations and interpretations in the jurisdictions in which we operate, as well as the requirements
of certain tax rulings;
• impacts from withholding requirements in various non-U.S. jurisdictions and our ability to recoup those withholdings, which may
depend on how much revenue we have in a particular jurisdiction to offset the related expenses;
•
impacts from acquisitions and related integration activities; or
•
impacts from new FASB requirements.