Intermedix - Laserfiche WebLink

Home Browse Search

INTERMEDIX HOLDINGS INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2010 Due to the change of ownership provisions of the Tax Reform Act of 1986, utilization of a portion of the Company's domestic net operating loss and tax credit carryforwards may be limited in future periods. The Company does not expect the carryforwards to expire before being applied to reduce future income tax liabilities. The Predecessor's income tax returns for the 2006, 2007 and 2008 tax years are currently at the appeals level as a result of an examination of these years by the IRS. The Company does not expect that the results of this examination will have a material effect on its financial condition or results of operations. With few exceptions, as of December 31, 2010, the Company is no longer subject to U.S. federal, state, local or foreign examinations by tax authorities for years before 2006. At December 31, 2010 there was $0.3 million of gross unrecognized tax benefits which were acquired from the Predecessor. The Company recognizes interest accrued related to unrecognized tax benefits and penalties as interest expense in its consolidated statements of operations. The amount of interest and penalties for the period ending December 31, 2010 is immaterial. The Company believes that it is reasonably possible that the $0.3 million of unrecognized tax benefits may be recognized by the end of 2011. (12) Fair Value of Assets and Liabilities Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e. the exit price) in an orderly transaction between market participants at the measurement date. In determining fair value, the Company uses various valuation approaches, including quoted market prices and discounted cash flows. A hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable input be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability developed based on market data obtained from independent sources. Unobservable inputs are inputs that reflect a company's judgment concerning the assumptions that market participants would use in pricing the asset or liability developed based on the best information available under the circumstances. The fair value hierarchy is broken down into three levels based on the reliability of inputs as follows: Level 1 — Valuations based on quoted prices in active markets for identical instruments that the Company is able to access. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these products does not entail a significant degree of judgment. Level 2 — Valuations based on quoted prices in active markets for instruments that are similar, or quoted prices in markets that are not active for identical or similar instruments, and model- derived valuations in which all significant inputs and significant value drivers are observable in active markets. Level 3 — Valuations based on inputs that are unobservable and significant to the overall fair value measurement. 26 (Continued)