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~ I r] ! I 1. II [ I [ I [ I ; I [ I II ! J ~ I ; j ~ ] : 1 ~ ] !'lOT FOR PUBLIC INSPECTIO;'\l / DO ;'\lOT COPY This tinancial statement is private and exempt from public inspection. or copying of public records pursuant to Florida Statutes 119.071 (I) (c). Metric Engineering, Ine. and Subsidiaries Notes to Consolidated Financial Statements June 30, 2009 Summary of Sh!Dificant Accounting Policies (continued) Income Taxes Income taxes are provided for the tax effects of transactions reported in the financial statements and consists of taxes currently due plus deferred taxes related primarily to differences between the basis of current assets and current liabilities as reported on the cash basis for income tax purposes and on the accrual basis used for financial statement presentation in accordance with u.s. generally accepted accounting principles. The deferred tax assets and liabilities represent the future tax return consequences of those differences, which will either be taxable or deductible when the assets and liabilities are recovered or settled. Deferred tax assets are also recognized for operating losses that are available to offset future taxable income. New Pronouncements During September 2006 FASB issued Statement Number 157 - Fair Value Measurements to define fair value, establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), and expand disclosures about fair value measurements. The Statement provides a single definition of fair value, together with a framework for measuring fair value that results in increased consistency and comparability in fair value measurements. The amendments made by this Statement advance the initiatives to simplify the accounting literature, eliminating differences that have added to the complexity in GAAP. The statement is applicable for years beginning in 2008. During February 2007 FASB issued Statement Number 159 - The Fair Value Option for Financial Assets and Financial Liabilities-including an amendment of FASB Statement No. 115 that permits entities to choose to measure many financial instruments and certain other items at fair value. The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. This Statement is expected to expand the use of fair value measurement, which is consistent with the Board's long-term measurement objectives for accounting for financial instruments, and the issuance of Statement Number 157 - Fair Value Measurements discussed above. During December 2007 FASB revised Statement Number 141 - Business Combinations to improve the relevance, representational faithfulness, and comparability of the information that a reporting entity provides in its financial reports about a business combination and its effects. This Statement establishes principles and requirements for how the acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any non-controlling interest in the acquire, measures goodwill or a gain from a bargain purchase and expands disclosures to evaluate the nature and financial effects of the acquisition. This Statement applies to all transactions or other events in which an entity (the acquirer) obtains control of one or more businesses (the acquirer), including those sometimes referred to as "true mergers" or "mergers of equals" and combinations achieved without the transfer of consideration. This Statement applies to all business entities, including mutual entities that previously used the pooling-of-interests method of accounting for some business combinations. 7