Income Taxes	9 Months Ended
Sep. 30, 2011
Income Taxes
Income Taxes	11. Income Taxes Income taxes for the interim periods presented have been included in the accompanying financial statements on the basis of an estimated annual effective tax rate. In addition to the amount of tax resulting from applying the estimated annual effective tax rate to pre-tax income/(loss), we include certain items treated as discrete events to arrive at an estimated overall tax amount. Generally, the amount of income tax expense or benefit allocated to continuing operations is determined without regard to the tax effects of other categories of income or loss, such as Accumulated other comprehensive income/loss ("AOCI"). However, an exception to the general rule is provided when there is a pre-tax loss from continuing operations and pre-tax income from other categories in the current year. The intraperiod tax allocation rules in ASC 740 related to items charged directly to AOCI can result in disproportionate tax effects that remain in AOCI until certain events occur. During the quarter, we eliminated the disproportionate tax effects in AOCI related to our cash flow hedges. The underlying inventory being hedged was sold and the unrealized gains/losses were reclassified to the statement of operations which resulted in the release of approximately $15.0 million of deferred tax expense to continuing operations for the nine months ended September 30, 2011. The effective tax rate for the nine months ended September 30, 2011 was negative 6.5%, including the discrete impact of the disproportionate tax effects from the cash flow hedges described above. The effective tax rate for the nine months ended September 30, 2010 was negative 1.5%. The primary difference between the effective tax rate and statutory tax rate in the jurisdictions in which we operate is a result of the valuation allowance against our net U.S. deferred tax assets. We have a valuation allowance against our net U.S. deferred tax assets (excluding "naked credits"). Naked credits refer to deferred tax liabilities associated with the tax amortization of goodwill and indefinite lived intangible assets that are not amortized for financial reporting purposes. The deferred tax liability remains on the balance sheet indefinitely until such time the related assets are impaired or the business to which those assets relate are disposed. As the deferred tax liability could have an indefinite life, it is not netted against our deferred tax assets when determining the required valuation allowance. The valuation allowance was established based upon management's assessment of all available evidence, both positive and negative, including current and historical operating results, future income projections and potential tax-planning strategies. The conclusion was based primarily on our cumulative pretax losses in recent years and the need to generate significant amounts of taxable income in future periods in order to utilize existing deferred tax assets. The valuation allowance increased to $584.1 million as of September 30, 2011, from $511.2 million at December 31, 2010. The increase in valuation allowance was a result of an increase in our U.S. deferred tax assets, primarily related to U.S. federal and state net operating losses. We intend to maintain a full valuation allowance on our U.S. deferred tax assets until sufficient positive evidence related to sources of future taxable income exists to support a reversal of the valuation allowance. The statute of limitations on our 2007 U.S. Federal tax return expired during the quarter. The impact of the expiration on our financial statements was not material for the nine months ended September 30, 2011

Income Taxes

9 Months Ended

Sep. 30, 2011

11. Income Taxes

Income taxes for the interim periods presented have been included in the accompanying financial statements on the basis of an estimated annual effective tax rate. In addition to the amount of tax resulting from applying the estimated annual effective tax rate to pre-tax income/(loss), we include certain items treated as discrete events to arrive at an estimated overall tax amount.

Generally, the amount of income tax expense or benefit allocated to continuing operations is determined without regard to the tax effects of other categories of income or loss, such as Accumulated other comprehensive income/loss ("AOCI"). However, an exception to the general rule is provided when there is a pre-tax loss from continuing operations and pre-tax income from other categories in the current year. The intraperiod tax allocation rules in ASC 740 related to items charged directly to AOCI can result in disproportionate tax effects that remain in AOCI until certain events occur.

During the quarter, we eliminated the disproportionate tax effects in AOCI related to our cash flow hedges. The underlying inventory being hedged was sold and the unrealized gains/losses were reclassified to the statement of operations which resulted in the release of approximately $15.0 million of deferred tax expense to continuing operations for the nine months ended September 30, 2011.

The effective tax rate for the nine months ended September 30, 2011 was negative 6.5%, including the discrete impact of the disproportionate tax effects from the cash flow hedges described above. The effective tax rate for the nine months ended September 30, 2010 was negative 1.5%. The primary difference between the effective tax rate and statutory tax rate in the jurisdictions in which we operate is a result of the valuation allowance against our net U.S. deferred tax assets.

We have a valuation allowance against our net U.S. deferred tax assets (excluding "naked credits"). Naked credits refer to deferred tax liabilities associated with the tax amortization of goodwill and indefinite lived intangible assets that are not amortized for financial reporting purposes. The deferred tax liability remains on the balance sheet indefinitely until such time the related assets are impaired or the business to which those assets relate are disposed. As the deferred tax liability could have an indefinite life, it is not netted against our deferred tax assets when determining the required valuation allowance. The valuation allowance was established based upon management's assessment of all available evidence, both positive and negative, including current and historical operating results, future income projections and potential tax-planning strategies. The conclusion was based primarily on our cumulative pretax losses in recent years and the need to generate significant amounts of taxable income in future periods in order to utilize existing deferred tax assets. The valuation allowance increased to $584.1 million as of September 30, 2011, from $511.2 million at December 31, 2010. The increase in valuation allowance was a result of an increase in our U.S. deferred tax assets, primarily related to U.S. federal and state net operating losses. We intend to maintain a full valuation allowance on our U.S. deferred tax assets until sufficient positive evidence related to sources of future taxable income exists to support a reversal of the valuation allowance.

The statute of limitations on our 2007 U.S. Federal tax return expired during the quarter. The impact of the expiration on our financial statements was not material for the nine months ended September 30, 2011

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

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Reference 2: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 109

-Paragraph 136, 172

-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 3: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

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-Paragraph 43, 44, 45, 46, 47, 48, 49

-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 4: http://www.xbrl.org/2003/role/presentationRef

-Publisher SEC

-Name Regulation S-X (SX)

-Number 210

-Section 08

-Paragraph h

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Reference 5: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 740

-SubTopic 10

-Section 50

-Paragraph 3

-URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32559-109319

Reference 6: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 740

-SubTopic 10

-Section 50

-Paragraph 9

-URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32639-109319

Reference 7: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

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-URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32718-109319

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-Name Accounting Standards Codification

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-Section S99

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-URI http://asc.fasb.org/extlink&oid=6881521&loc=d3e23780-122690

+ Details

HAWKER BEECHCRAFT ACQUISITION CO LLC 10-Q