13.

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 September 30, 2015 and December 31, 2014 are as follows (figures are in thousands of USD):

	September 30, 2015		December 31, 2014

Losses carry forward (U.S.) ⁽¹⁾	$	6,877	$	7,014
Losses carry forward (Non-US) ⁽¹⁾		2,781		2,000
Product warranties and other reserves		4,505		4,531
Property, plant and equipment		4,623		4,684
Share-based compensation		266		266
Bonus accrual		476		372
Other accruals		1,053		1,319
Others		1,397		1,496
Total deferred tax assets		21,978		21,682
Less: taxable temporary difference related to revenue recognition		(187)		(472)
Total deferred tax assets, net		21,791		21,210
Less: Valuation allowance		(9,159)		(9,236)
Total deferred tax assets, net of valuation allowance ⁽²⁾	$	12,632	$	11,974

(1)

The net operating losses carry forward for the U.S. entities 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 China entities can be carried forward for 5 years to offset taxable income. However, as of September 30, 2015, the valuation allowance was $9.2 million, including $7.1 million allowance for the Company’s deferred tax assets in the United States and $2.1 million allowance for the Company’s non-U.S. deferred tax assets in China. 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 deferred tax assets in China, 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 $5.4 million and $4.9 million of net deferred income tax asset as of September 30, 2015 and December 31, 2014, respectively, are included in non-current deferred tax assets in the accompanying condensed unaudited consolidated balance sheets. The remaining $7.2 million and $7.1 million of net deferred income tax assets as of September 30, 2015 and December 31, 2014, respectively, are included in current deferred tax assets.