Deferred Income Tax Assets

3 Months Ended

Mar. 31, 2013

Income Tax Disclosure [Abstract]

Deferred Income Tax Disclosure [Text Block]

10. Deferred Income Tax Assets

In accordance with the provisions of ASC Topic 740, “Income Taxes,” the Company assesses, on a quarterly basis, its ability to realize its deferred tax assets. Based on the more likely than not standard in the guidance and the weight of available evidence, the Company believes a valuation allowance against its deferred tax assets is necessary. In determining the need for a valuation allowance, the Company considered the following significant factors: an assessment of recent years’ profitability and losses by tax authorities; the Company’s expectation of profits based on margins and volumes expected to be realized, which are based on current pricing and volume trends; the long period in all significant operating jurisdictions before the expiry of net operating losses, noting further that a portion of the deferred tax asset is composed of deductible temporary differences that are subject to an expiry period until realized under tax law. The Company will continue to evaluate the provision of valuation allowance in future periods.

The components of estimated deferred income tax assets as of March 31, 2013 and December 31, 2012 are as follows (figures are in thousands of USD):

	March 31, 2013			December 31, 2012
Losses carry forward (U.S.) (1)	$	7,962		$	7,004
Losses carry forward (PRC) (1)		1,850			1,887
Product warranties and other reserves		3,374			3,253
Property, plant and equipment		3,859			3,774
Share-based compensation		240			240
Bonus accrual		110			196
Other accruals		914			696
Others		596			839
Total deferred tax assets		18,905			17,889
Less: taxable temporary difference related to revenue recognition		(989	)		(397	)
Total deferred tax assets, net		17,566			17,492
Less: Valuation allowance		(10,110	)		(8,988	)
Total deferred tax assets, net of valuation allowance  (2)	$	7,806		$	8,504

(1) The net operating losses carry forward for the U.S. entity for income tax purposes are available to reduce future years' taxable income. These losses will expire, if not utilized, in 20 years. Net operating losses carry forward for non-U.S. entities can be carried forward for 5 years to offset taxable income. However, as of March 31, 2013, valuation allowance was $10.1 million, including $8.6 million allowance for the Company’s deferred tax assets in the United States and $1.5 million allowance for the Company’s non-U.S. deferred tax assets. Based on the Company’s current operations in the United States, management believes that the deferred tax assets in the United States are not likely to be realized in the future. For the non-U.S. deferred tax assets, pursuant to certain tax laws and regulations in China, the management believes such amount will not be used to offset future taxable income.

(2) Approximately $4.2 million and $4.1 million of deferred income tax asset as of March 31, 2013 and December 31, 2012, respectively, are included in non-current deferred tax assets in the accompanying condensed unaudited consolidated balance sheets. The remaining $3.6 million and $4.4 million of deferred income tax assets as of March 31, 2013 and December 31, 2012, respectively, are included in current deferred tax assets.