Income Taxes

9 Months Ended

Sep. 30, 2011

Income Taxes

Income Taxes

Note 8:      Income Taxes

The Company accounts for income taxes in accordance with income tax accounting guidance (ASC 740, Income Taxes).The income tax accounting guidance results in two components of income tax expense:current and deferred.Current income tax expense reflects taxes to be paid or refunded for the current period by applying the provisions of the enacted tax law to the taxable income or excess of deductions over revenues.The Company determines deferred income taxes using the liability (or balance sheet) method.Under this method, the net deferred tax asset or liability is based on the tax effects of the differences between the book and tax bases of assets and liabilities, and enacted changes in tax rates and laws are recognized in the period in which they occur.Deferred tax assets are reduced by a valuation allowance if, based on the weight of evidence available, it is more likely than not that some portion or all of a deferred tax asset will not be realized.The valuation allowance is a contra asset account that reduces the deferred tax asset to its expected realizable value and is based on management's expectation of future taxable income.As of September 30, 2011, the Company had a valuation allowance of $1,482,000, which was recorded in 2011 and has lowered the Company's effective tax rate.