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Income Taxes | 12 Months Ended
--- | ---
Aug. 31, 2016
Income Taxes |
Income Taxes |
| 10. |  | INCOME TAXES
The Company’s loss before income taxes is primarily derived from the operations in Taiwan and income tax expense is primarily incurred in Taiwan. The statutory income tax rate in Taiwan is 17%. An additional 10% corporate income tax is assessed on undistributed income for the entities in Taiwan, but only to the extent such income is not distributed or set aside as a legal reserve before the end of the following year. The 10% surtax is recorded in the period the income is earned, and the reduction in the surtax liability is recognized in the period the distribution to stockholders or the setting aside of legal reserve is finalized in the following year. The Company’s loss before income taxes for the years ended August 31, 2016 and 2015 consist of the following (in thousands):
|  | Years Ended August 31, |
|  | 2016 |  | 2015 |
U.S. operations |  | $ | (973) |  | $ | (770) |
Foreign operations |  |  | (20,331) |  |  | (12,547) |
Loss before income taxes |  | $ | (21,304) |  | $ | (13,317) |
All the income tax expense is foreign current tax expense for the year ended August 31, 2015. Income tax expense differed from the amounts computed by applying the statutory U.S. federal income tax rate of 34% to loss before income taxes for the years ended August 31, 2016 and 2015 as a result of the following (in thousands):
|  | Years Ended August 31, |
|  | 2016 |  | 2015 |
Computed “expected” income tax benefit |  | $ | (7,243) |  | $ | (4,528) |
Foreign tax rate differential |  |  | 2,078 |  |  | 1,432 |
Valuation allowance |  |  | 5,097 |  |  | 3,125 |
Other |  |  | 68 |  |  | (28) |
Income tax expense |  | $ | — |  | $ | 1 |
Net deferred tax assets (liabilities) as of August 31, 2016 and 2015 consist of the following (in thousands):
|  | August 31, |
|  | 2016 |  | 2015 |
Deferred tax assets: |  |  |  |  |  |  |
Inventories, primarily due to inventory obsolescence and lower of cost or market provisions |  | $ | 1,659 |  | $ | 1,346 |
Allowance for doubtful accounts |  |  | 155 |  |  | 428 |
Accruals and other |  |  | 196 |  |  | 123 |
Property, plant and equipment |  |  | 4,126 |  |  | 2,627 |
Stock-based compensation |  |  | 609 |  |  | 617 |
Investments in unconsolidated entities |  |  | 5,560 |  |  | 5,587 |
Net operating loss carryforwards |  |  | 21,396 |  |  | 19,086 |
Net operating loss carryforwards-undistributed earnings tax |  |  | 9,679 |  |  | 7,662 |
Total gross deferred tax assets |  |  | 43,380 |  |  | 37,476 |
Less: Valuation allowance |  |  | (43,380) |  |  | (37,476) |
Deferred tax assets, net of valuation allowance |  | $ | — |  | $ | — |
A valuation allowance is provided when it is more likely than not that the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible and operating loss carryforwards utilizable. Management considers the scheduled reversal of deferred tax liabilities, carryback availability, projected future income, and tax-planning strategies in making this assessment. The Company established full valuation allowances to offset all of its deferred tax assets due to the uncertainty of realizing future tax benefits from its net operating loss carryforwards and other deferred tax assets. As of August 31, 2016, unused net operating loss carryforwards were as follows (in thousands):
|  | August 31, |  | Expiration |
|  | 2016 |  | Year |
U.S. federal net operating loss carryforwards |  | $ | 11,578 |  | 2025-2036 |
Foreign net operating loss carryforwards (expiring over the next 5 years) |  |  | 8,018 |  | 2017-2021 |
Foreign net operating loss carryforwards (expiring in more than 5 years) |  |  | 94,431 |  | 2022-2026 |
Foreign net operating loss carryforwards (indefinite life) |  |  | 107,540 |  | — |
Total unused net operating loss carryforwards |  | $ | 221,567 |  |  |
Unrecognized Tax Benefits As of both August 31, 2016 and 2015, the Company had no unrecognized tax benefits. The Company files income tax returns in the United States federal and certain foreign jurisdictions. The tax years 2005 through 2015 remain open in most jurisdictions, and previously filed in various U.S. states. Below is a summary of open tax years by major tax jurisdiction:
|  | Open |
|  | Tax Year |
U.S. federal |  | 2005-2015 |
U.S. state |  | 2005-2014 |
Foreign—Taiwan |  | 2013-2015 |
The Company is not currently under examination by income tax authorities in any federal, state or foreign jurisdictions. The Company does not expect that the total amount of unrecognized tax benefits will change significantly within the next 12 months.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(h)) -URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=65882285&loc=d3e32559-109319 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=65882285&loc=d3e32718-109319 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=65882285&loc=d3e32639-109319 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=65882285&loc=d3e32537-109319 + Details
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