12. 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 deferred income tax assets at December 31, 2014 and 2013, were as follows (figures are in thousands of USD):

	December 31,
	2014		2013

Losses carryforward (U.S.) ⁽¹⁾	$	7,014	$	6,825
Losses carryforward (PRC)		2,000		1,838
Product warranties and other reserves		4,531		4,207
Property, plant and equipment		4,684		4,346
Share-based compensation		266		296
Bonus accrual		372		557
Other accruals		1,319		850
Others		1,496		1,103
Total deferred tax assets		21,682		20,022
Less: taxable temporary difference related to revenue recognition		(472)		(793)
Total deferred tax assets, net		21,210		19,229
Less: valuation allowance		(9,236)		(8,918)
Total deferred tax assets, net of valuation allowance ⁽²⁾	$	11,974	$	10,311

(1)	The net operating loss carry forwards for the U.S. entity for income tax purposes are available to reduce future years' taxable income. These carry forwards will expire, if not utilized, at varying times over the next 20 years. Net operating loss carryforwards for non-U.S. entities can be carried forward for 5 years to offset taxable income. However, as of December 31, 2014, valuation allowance was $9.2 million, including $7.4 million allowance for the Company’s deferred tax assets in the United States and $1.8 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 $4.9 million and $4.5 million of deferred income tax assets as of December 31, 2014 and 2013, respectively, is included in non-current deferred tax assets in the consolidated balance sheets. The remaining $7.1 million and $5.8 million of deferred income tax assets as of December 31, 2014 and 2013, respectively, is included in the current deferred tax assets.

The activity in the Company’s valuation allowance for deferred tax assets during the years ended December 31, 2014 and 2013 are summarized as follows (figures are in thousands of USD):

	Year Ended December 31,
	2014		2013

Balance at beginning of year	$	8,918	$	8,988
Amounts provided for during the year		485		70
Amounts used during the year		(160)		(188)
Foreign currency translation		(7)		48
Balance at end of year	$	9,236	$	8,918