Tucows 2014 Annual Report Download - page 87

At December 31, 2014, our balance sheet reflects a derivative instrument liability of $1.1 million as a result of
our existing foreign exchange contracts. Until their respective maturity dates, these contracts will fluctuate in value in line
with movements in the Canadian dollar relative to the U.S. dollar.
OTHER INCOME AND EXPENSES
Year ended December 31,
2014 2013
Other income (expense), net $ (206,730) $ (354,857)
Increase over prior period $ 148,127
Increase - percentage (42)%
Percentage of net revenues (0)% (0)%
Other expenses for Fiscal 2014 which primarily consist of interest we incur in connection with our credit facility
with the Bank of Montreal, decreased by $0.2 million, to $0.2 million, as compared with Fiscal 2013.
INCOME TAXES
The following table presents our provision for income taxes for the periods presented:
Year ended December 31,
2014 2013
Provision for income taxes $ 3,054,229 $ 1,619,339
Increase in provision over prior period $ 1,434,890
Increase - percentage 89%
Percentage of net revenues 2%1%
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 2014 includes tax on profits of $3.4 million, offset by a recovery of $0.3 million related to investment tax
credits.
Fiscal 2013 includes tax on profits of $1.8 million, offset by a recovery of $0.2 million related to investment tax
credits.
We had approximately $0.1 million of total gross unrecognized tax benefit as of December 31, 2014 and as of
December 31, 2013, 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 9 of Notes to
Consolidated Financial Statements included in this Annual Report on Form 10-K.
OTHER COMPREHENSIVE INCOME (LOSS)
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