3.	Income Taxes

Income taxes have been accounted for using the liability method in accordance with ASC 740 “Income Taxes”. The Company computes its interim provision for income taxes by applying the estimated annual effective tax rate method. The Company estimates an annual effective tax rate of 2.85% for the year ending December 31, 2015. The Company incurred losses for the three and nine month periods ended September 30, 2015 and is forecasting additional losses through the year, resulting in an estimated net loss for both financial statement and tax purposes for the year ending December 31, 2015. Due to the Company’s history of losses, there is not sufficient evidence to record a net deferred tax asset associated with the U.S. operations, accordingly. A full valuation allowance has been recorded related to the net deferred tax asset in that jurisdiction. Deferred tax assets and liabilities related to the TransEnterix Italia subsidiary have been recorded on a preliminary basis as a component of purchase accounting as of the acquisition date. The Company is recording an income tax benefit for the quarter ended September 30, 2015 in the amount of $99,000 in connection with the Italian taxing jurisdiction. There is no net deferred tax asset recorded in relation to TransEnterix Italia and accordingly no valuation allowance has been recorded in that jurisdiction.

The Company’s effective tax rate for each of the nine month periods ended September 30, 2015 and 2014 was 0.297% and 0%, respectively. At September 30, 2015, the Company had no unrecognized tax benefits that would affect the Company’s effective tax rate.