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Income Taxes
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6 Months Ended |
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Jun. 30, 2011
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| Income taxes [Abstract] | |
| INCOME TAXES |
NOTE 6 — INCOME TAXES
Under GAAP, a valuation allowance must be recorded if it is “more likely than not” that such
deferred tax assets will not be realized. Appropriate consideration is given to all available
evidence (both positive and negative) related to the realization of the deferred tax assets on a
quarterly basis.
In conducting our regular quarterly evaluation, we decided to maintain a full deferred tax
asset valuation allowance as of June 30, 2011 based primarily upon the existence of a three-year
cumulative loss position. Although our current financial forecasts indicate that sufficient
taxable income will be generated in the future to ultimately realize the existing deferred tax
benefits, those forecasts were not considered to constitute sufficient positive evidence to
overcome the observable negative evidence associated with the three-year cumulative loss position
determined as of June 30, 2011.
At June 30, 2011, the valuation allowance decreased to $82.7 million compared to $88.6 million
at March 31, 2011 and $92.7 million at December 31, 2010. This decrease was mainly due to a
decrease of deferred tax assets balance related to credit loss provision. We had zero balance of
net deferred tax assets as of June 30, 2011 and December 31, 2010. During the first half of 2010,
we recorded an additional valuation allowance of $37.8 million against our deferred tax assets,
resulting in $83.0 million of valuation allowance at June 30, 2010. There was $1.2 million of net
deferred tax liabilities as of June 30, 2010.
The tax expense recognized for the three and six months ended June 30, 2011 was primarily due
to an out-of-period adjustment of $605,000 and $718,000, respectively, to reserve for certain ASC
740-10(FIN 48) exposure items. During the fourth quarter of 2009, the Company recorded a tax
benefit upon electing a 5-year net operating loss carryback according to the IRS Code section IRC §
172(b)(1)(H) amended in November 2009. This out -of-period adjustment was to reinstate the
reserves that the Company released as the statute of limitations had expired in previous years. Due
to the Company filing amended tax returns as a result of the tax law revision, the Company needed
to reestablish these reserves. The tax benefit recognized during the first half of 2010 was
primarily due to the reversal of FIN 48 reserves related to lower assessment from the result of the
State of California Franchise Tax Board audit for the tax year 2005 through 2007.
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