Page 92 - New8814 GP 2011_AR-fnl

Basic HTML Version

F-12
F-12
Income Taxes
The provision for income taxes is computed using the asset and liability method, under which deferred tax assets and
liabilities are recognized for the expected future tax consequences attributable to temporary differences between the financial
reporting carrying amount of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities
are measured using enacted tax rates expected to apply to taxable income in years in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in
operating results in the period of enactment. Deferred tax assets are reduced by a valuation allowance when it is more likely
than not that some portion or all of the deferred tax assets will not be realized.
The Company recognizes uncertainties in income taxes within the financial statements based on FASB Accounting
Standards Codification (ASC) 740. The standard prescribes a process by which the likelihood of a tax position is gauged
based upon the technical merits of the position, and then a subsequent measurement relates the maximum benefit and the
degree of likelihood to determine the amount of benefit recognized in the financial statements. The Company excludes
interest and penalties on tax uncertainties from the computation of income tax expense. These costs are treated as pre-tax
expenses.
Business Combinations
The Company accounts for business combinations based on the guidance within ASC 805, which generally requires an
acquirer to recognize the identifiable assets acquired, liabilities assumed, contingent purchase consideration and any
noncontrolling interest in the acquiree at fair value on the date of acquisition. It also requires an acquirer to recognize as
expense most transaction and restructuring costs as incurred, rather than include such items in the cost of the acquired entity.
Recent Accounting Pronouncements
Effective January 1, 2011, the Company adopted the amended guidance in ASC Topic 805,
Business Combinations
,
which, if the company completes a business combination during the reporting period, requires the Company to disclose pro
forma revenue and earnings of the combined entity as though the business combinations that occurred during the current
period had occurred as of the beginning of the comparable prior annual reporting period. The amended guidance also requires
the Company to include a description of the nature and amount of material, nonrecurring pro forma adjustments directly
attributable to the business combination included in the reported pro forma revenue and earnings.
Effective January 1, 2011, the Company adopted the second phase of the amended guidance in ASC Topic 820,
Fair
Value Measurements and Disclosures,
which requires the Company to disclose information in the reconciliation of recurring
Level 3 measurements regarding purchases, sales, issuances and settlements on a gross basis, with a separate reconciliation
for assets and liabilities. The Company did not experience an impact from the additional disclosure requirements as the
Company does not have any recurring Level 3 measurements.
Effective January 1, 2012, the Company will be required to adopt the third phase of amended guidance in ASC Topic
820,
Fair Value Measurements and Disclosures.
The purpose of the amendment is to achieve common fair value
measurement and disclosure requirements by improving comparability of fair value measurements presented and disclosed in
financial statements prepared in accordance with GAAP and those prepared in conformity with International Financial
Reporting Standards, or IFRS. The amended guidance clarifies the application of existing fair value measurement
requirements and requires additional disclosure for Level 3 measurements regarding the sensitivity of fair value to changes in
unobservable inputs and any interrelationships between those inputs. The Company currently would not be impacted by the
additional disclosure requirements as the Company does not have any recurring Level 3 measurements.
Effective January 1, 2012, the Company will be required to adopt the amended guidance in ASC Topic 220,
Comprehensive Income
. This accounting standards update, which helps to facilitate the convergence of GAAP and IFRS, is
aimed at increasing the prominence of other comprehensive income in the financial statements by eliminating the option to
present other comprehensive income in the statement of stockholders’ equity, and requiring that net income and other
comprehensive income be presented in either a single continuous statement or in two separate but consecutive statements.
This amended guidance
will be implemented retroactively
. The Company has determined that the changes to the accounting
standards will affect the presentation of consolidated financial information but will not have a material effect on the
Company’s financial position or results of operations.