Income Taxes Income taxes

6 Months Ended

Sep. 30, 2011

INCOME TAXES [Abstract]

Income Tax Disclosure [Text Block]

INCOME TAXES

On August 9, 2011, the Company received a report from the German tax authorities upon completion of a tax audit of the Company's German subsidiary for fiscal years 2005 through 2007. During the quarter ended June 30, 2011, the Company considered the results of the tax audit in measuring its uncertain tax position for transfer pricing between its German subsidiary and other affiliated companies. The effect of the change in estimate was to increase the Company's liability for uncertain tax positions and income tax expense by $4,000 for the quarter ended June 30, 2011. During the quarter ended September 30, 2011, the Company settled $33,000 of the $45,000 in tax liability accrued in the prior quarter for uncertain tax position related to Germany. The remaining balance is expected to be settled within the next twelve months.

During the quarter ended June 30, 2011, while reconciling the German tax audit results to its records for the German subsidiary, the Company discovered certain errors in the amounts of German net operating loss carryforwards and taxable income included in its income tax provision for prior years. The effect of these errors was an understatement of income tax expense by $45,000 and $48,000 in fiscal years 2010 and 2011, respectively. These amounts were recorded during the quarter ended June 30, 2011. Income tax expense for the three month period ended June 30, 2011, and for six month period ended September 30, 2011 includes the effect of the correction of these errors. Management believes these amounts are immaterial to the financial statements for all affected periods.

The tax audit in Germany also resulted in the assessment of certain withholding taxes on intercompany payments in Germany relating to fiscal years 2005 through 2007. Management believes these withholding taxes are refundable pursuant to tax treaties between Germany and the United States and under European Union law. During the quarter ended September 30, 2011, the Company settled approximately $403,000 previously accrued for withholding taxes. Additionally, during the quarter ended September 30, 2011, the Company assessed the potential withholding liability for the periods subsequent to the periods already examined by the German tax authorities, and as a result, identified additional withholding taxes due of approximately $196,000. For the quarter ended September 30, 2011, the Company has recorded this amount as an accrued liability and as a corresponding receivable to reflect the anticipated future refund of these withholding taxes under the tax treaties. As of September 30, 2011, the Company has an accrued liability of approximately $196,000 and a current asset of approximately $599,000 relating to these withholding taxes.