Income Taxes

6 Months Ended

Jun. 30, 2013

The Company accounts for income taxes in accordance with ASC 740, Accounting for Income Taxes. The Company’s benefit from income taxes was $0.1 million on a loss before income taxes of $5.5 million, resulting in an effective tax rate of 1.4% for the second quarter of 2013. The Company's benefit from income taxes was $1.1 million on a loss before income taxes of $7.5 million, resulting in an effective tax rate of 14.7% for the first six months of 2013. For the second quarter of 2013, the effective tax rate differs from the statutory rate primarily due to foreign operations in lower tax jurisdictions, partially offset by an increase in the valuation allowance placed against our US deferred tax assets. For the first six months of 2013, the effective tax rate differs from the statutory rate primarily due to foreign operations in lower tax jurisdictions, the release of tax reserves and the benefit recorded for the 2012 research and development credit. These benefits were partially offset by an increase in the valuation allowance placed against our U.S. deferred tax assets.

The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. As of June 30, 2013 and December 31, 2012, the Company had accrued approximately $8.4 million and $8.5 million, respectively for potential interest and penalties related to uncertain tax positions.

The Company evaluates the recoverability of deferred tax assets by weighing all available evidence to arrive at a conclusion as to whether it is more likely than not that all or some portion of the deferred tax assets will not be realized. Significant judgment is required to evaluate the weight of the positive and negative evidence. When assessing the recoverability of the deferred tax assets, the Company considers:


•	The nature and frequency of cumulative financial reporting losses in recent years


•	Future reversals of existing taxable temporary differences


•	Future taxable income exclusive of reversing temporary differences


•	Tax planning strategies that the Company would consider implementing, if needed

Based on the Company's analysis, it has concluded that it is more likely than not that some of the deferred tax assets will expire unutilized. Therefore, the Company has provided a valuation allowance against a portion of the deferred tax assets. The Company believes it is more likely than not that the remaining deferred tax assets will be realized based on future reversals of taxable temporary differences and income tax in carryback periods. The Company believes that the valuation allowance against the deferred tax assets will increase by $7.4 million during 2013 as a result of losses generated in the current year. The amount of the deferred tax assets considered realizable, however, could be adjusted if prudent and feasible tax planning strategies are developed or if objective negative evidence in the form of cumulative losses is no longer present.

The tax years 2009 and forward remain open to federal examination and the Company has filed refund claims for tax years 2006 through 2008 whereby the statute of limitations remains open for these years to the extent of the requested refund. Tax years 2007 and forward remain open to state and international examination in most jurisdictions.

- 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

-Topic 740

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-Section 50

-Paragraph 15

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

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

-Publisher FASB

-Name Accounting Standards Codification

-Topic 235

-SubTopic 10

-Section S99

-Paragraph 1

-Subparagraph (SX 210.4-08.(h))

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

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

-Publisher SEC

-Name Regulation S-X (SX)

-Number 210

-Section 08

-Paragraph h

-Article 4

Reference 4: 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 5: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 740

-SubTopic 10

-Section 50

-Paragraph 2

-URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32537-109319

Reference 6: 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 7: 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 8: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 109

-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.

+ Details

Aspect Software Group Holdings Ltd. 10-Q