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Income Taxes
9 Months Ended
Sep. 30, 2011
Income Taxes [Abstract] 
Income Tax Disclosure
Income Taxes

The Company's effective tax rate for the three months ended September 30, 2011 and 2010, differs from the statutory rate primarily due to a full valuation allowance provided against its United States (“U.S.”) net deferred tax assets, Canadian research and experimental development claims, the impact of stock option expense, the amortization of goodwill for tax purposes and taxes on foreign income that differ from the U.S. tax rate.  In addition to the aforementioned items, the effective tax rate for the three months ended September 30, 2011 differs from the statutory rate due to a partial release of the Company's valuation allowance provided against its U.S. net deferred tax assets as a result of the purchase accounting associated with the acquisition of Continuous Computing.   Purchase accounting includes the establishment of a deferred tax liability due to the book tax basis differences related to specifically identified non-goodwill intangibles resulting from the acquisition. The net liability from the acquisition created an additional source of income to utilize our deferred tax assets.   As such, authoritative guidance requires the Company to record the impact on the Company's deferred tax assets outside of purchase accounting. An income tax benefit of $7.6 million was recognized upon the partial valuation allowance release.
The Company utilizes the asset and liability method of accounting for income taxes. The Company records deferred tax assets to the extent it believes these assets will more likely than not be realized. In making such determination, the Company considers all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies, and recent financial performance. Based upon the Company's review of all positive and negative evidence, including its projected three year U.S. cumulative pre-tax book loss and taxable loss, it concluded that a full valuation allowance should continue to be recorded against its U.S. net deferred tax assets at September 30, 2011. In certain other foreign jurisdictions, where the Company does not have cumulative losses or other negative evidence, the Company had net deferred tax assets of $18.3 million at September 30, 2011 and $16.6 million at December 31, 2010.  In the future, if the Company determines that it is more likely than not that it will realize its U.S. net deferred tax assets, it will reverse the applicable portion of the valuation allowance and recognize an income tax benefit in the period in which such determination is made.
The Company's unrecognized tax benefits and related interest and penalties during the three months ended September 30, 2011 increased by $2.2 million due to uncertain tax positions associated with the acquisition of Continuous Computing as part of the purchase accounting adjustments which was partially offset by a $1.1 million decrease related to the effective settlement of an examination by the Canadian Revenue Agency ("CRA"). The ending balance for the unrecognized tax benefits was approximately $2.0 million at September 30, 2011. The related interest and penalties were $180,000 and $154,000, respectively. The uncertain tax positions that are reasonably possible to decrease in the next twelve months are insignificant.
The CRA completed an examination of the Company for tax years 2006 through 2008 during the three months ended September 30, 2011. During the three months ended December 31, 2010, the CRA issued proposed adjustment notices. During the three months ended June 30, 2011, the CRA reissued the proposed adjustments and the Company, as of June 30, 2011, was in the process of reaching an agreement with CRA with respect to the tax carry-forward attributes to be utilized in future tax years. The Company agreed to the proposed adjustments and effectively settled the examination during the three months ended September 30, 2011. The effective settlement did not have a significant impact on the Company's financial statements. The Company is not currently under examination by tax authorities in any other jurisdictions.
The Company is currently under tax examination in India from the acquisition of Continuous Computing. The periods covered under examination are the Company's financial years 2004 through 2008. The examination is in various stages of appellate proceedings and all material uncertain tax positions associated with the examination have been taken into account in the ending balance of the unrecognized tax benefits at September 30, 2011. The Company is not under examination by tax authorities in any other jurisdictions.