Income Taxes Income taxes

9 Months Ended

Dec. 31, 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 nine month period ended December 31, 2011, the Company has settled $45,000 in tax liability accrued in the prior quarters for uncertain tax positions related to Germany. There was no outstanding tax liability relating to uncertain tax positions as of December 31, 2011.

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. An additional $8,000 of tax expense was recorded during the quarter ended December 31, 2011 when the tax liabilities were settled. Income tax expense for the nine month period ended December 31, 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 and assessed the potential withholding liability for the periods subsequent to the periods already examined by the German tax authorities. As a result, the Company identified additional withholding taxes due of approximately $196,000. During the quarter ended December 31, 2011, the Company paid out the $196,000 accrued in the prior quarter and received a refund of $266,000 out of the $599,000 anticipated refund recorded in the previous quarter. As of December 31, 2011, the Company has a current asset of approximately $333,000 relating to these withholding taxes.