Income Taxes

12 Months Ended

Dec. 31, 2012

Income Taxes [Abstract]

Income Taxes

Note 7 – Income Taxes

Income from continuing operations before income taxes was generated in the following jurisdictions:

	For the years ended December 31,
	2012		2011		2010
Domestic	$	1,492	$	6,220	$	806
Foreign		20,205		19,588		12,606
Total	$	21,697	$	25,808	$	13,412

The provision for income taxes consists of the following:

	For the years ended December 31,
	2012		2011			2010
Current:
Federal	$	—	$	244		$	32
State		1		443			0
Foreign		4,402		4,933			2,461
Total current		4,403		5,620			2,493
Deferred:
Federal		866		(4,543	)		0
State		93		(285	)		0
Foreign		106		765			113
Total deferred		1,065		(4,063	)		113
Total	$	5,468	$	1,557		$	2,606

The differences between the income tax provisions computed using the statutory federal income tax rate of 34% and the provisions for income taxes reported in the consolidated statements of operations are as follows:

	For the years ended December 31,
	2012			2011			2010
Expected tax at statutory rate	$	7,377		$	8,775		$	4,560
Foreign taxes at other rates		(2,513	)		(1,758	)		(1,642	)
Change in valuation allowance due to:
NOL valuation reserve adjustments		—			(1,639	)		(335	)
Utilization of NOL carryforwards		(43	)		(4,873	)		(725	)
Generation of NOL carryforwards		—			134			157
Prior year tax adjustments		(19	)		171			67
Other, net		666			747			524
Total	$	5,468		$	1,557		$	2,606

Current deferred tax assets and long-term deferred tax liabilities are presented as separate line items in the balance sheet. Long-term deferred tax assets of $2,565 and $2,874 as of December 31, 2012 and 2011, respectively, are included in other assets, net of accumulated amortization. Current deferred tax liabilities were $543 in 2012 and $269 in 2011 and are included in other accrued liabilities. The deferred income tax balances are comprised of the following:

	As of December 31,
	2012			2011
Deferred tax assets:
U.S. net operating loss carryforwards	$	299		$	508
Stock and long-term compensation plans		2,410			2,815
Foreign NOL and other carryforwards		2,675			2,502
US state income taxes		285			286
US alternative minimum tax		456			416
Deferred revenue		255			269
Accrued expenses and other		183			548
Total gross deferred tax assets		6,563			7,344
Less: Valuation allowance		(2,284	)		(2,088	)
Net deferred income tax assets	$	4,279		$	5,256
Deferred tax liabilities:
Swiss tax allowances	$	543		$	269
Intangible assets		141			324
Deferred tax liabilities	$	684		$	593

At December 31, 2012, we had $11,620 of U.S. net operating loss (NOL) carryforwards, of which, $9,093 represents U.S. tax deductions for employee stock option gains, the tax benefit of which, will be credited to additional paid in capital when the NOL carryforwards are utilized. The U.S. loss carryforwards expire in varying amounts beginning in 2022 and continuing through 2032. If certain substantial changes in the company’s ownership were deemed to have occurred, there would be an annual limitation on the amount of the U.S. NOL carryforwards that could be utilized.

At December 31, 2010, we had a valuation allowance for all our U.S. deferred tax assets totaling $7,252. In 2011, the tax benefit of utilized U.S. NOL carryforwards was $4,816. We determined that it was more likely than not that the remaining U.S. deferred tax assets would be realized and reversed the entire valuation allowance for U.S. deferred tax assets.

At December 31, 2012, we had foreign NOL carryforwards of $5,279 and other foreign deductible carryforwards of $3,491. The foreign NOL carryforwards have no expiration dates and the other deductible carryforwards expire from 2016 to 2019. At December 31, 2012, we had a valuation allowance of $2,284 for certain foreign deferred tax assets.

The net change in the valuation allowance for the years ended December 31, 2012, 2011, and 2010 were an increase of $196 and decreases of $5,625, and $550, respectively. This valuation allowance will be reviewed on a regular basis and adjustments made as appropriate. In addition to the utilization of NOLs in the U.S. and in foreign countries as noted above, the change in the valuation allowance also reflects other factors including, but not limited to, changes in our assessment of our ability to use existing NOLs, changes in currency rates and adjustments to reflect differences between the actual returns filed and the estimates we made at financial reporting dates. The company expects to generate adequate taxable income to realize deferred tax assets in foreign jurisdictions where no valuation reserve exists.

The company has not provided deferred U.S. taxes on its unremitted foreign earnings because it considers them to be permanently invested. The unremitted foreign earnings are estimated to be $108,000 at December 31, 2012.

We had no accrued interest or penalties for income tax liabilities at December 31, 2012. Our policy is to record interest expense and penalties on income taxes as income tax expense.

ASC 740-10, Accounting for Uncertainty in Income Taxes sets a “more likely than not” criterion for recognizing the tax benefit of uncertain tax positions. We have identified one such exposure concerning cost allocations related to the implementation of our worldwide strategy related to the ownership of our intellectual property for which we had a reserve of $560 and $470 at December 31, 2012 and 2011, respectively. The reserve is an offset to our U.S. deferred tax asset.

Our primary tax jurisdictions and the earliest year for which tax returns are subject to audit are presented in the following table. VASCO Data Security is abbreviated as “VDS”.

Australia	VDS Pty. Ltd.	2005
Austria	VDS Austria	2004
Belgium	VDS NV	2008
Belgium	VDS Europe NV	2008
Belgium	Lintel	2008
Belgium	Able NV	2006
Netherlands	VDS BV	2007
Singapore	VDS Asia Pacific	2007
Switzerland	VDS International GmbH	2006
United States	VDS International, Inc.	2005