|9 Months Ended|
Sep. 30, 2022
6. INCOME TAXES
The Company’s effective income tax rates for the three and nine months ended September 30, 2022 were (0.8%) and 0.2%, respectively, compared to effective income tax rates of 2.0% and 5.4% for the corresponding prior-year periods. The change in the effective income tax rates was primarily due to the effects of tax amortization on indefinite lived intangibles in 2022, valuation allowances, and certain permanent differences between tax and financial reporting purposes. The Company’s income tax expense or benefit for interim periods has been determined using an estimate of its annual effective tax rate (“AETR”), adjusted for discrete items. The Company notes this differs from the methodology used in the second quarter of 2022, as the factors that existed as of June 30, 2022 are no longer applicable.
The Company continues to assess the realizability of deferred tax assets (“DTAs”) and concluded that it has not met the “more likely than not” threshold. As of September 30, 2022, the Company continues to provide a valuation allowance against its DTAs that cannot be offset by existing deferred tax liabilities. In accordance with Accounting Standards Codification 740 (“ASC 740”), this assessment has taken into consideration the jurisdictions in which these DTAs reside. The valuation allowance against DTAs has no effect on the actual taxes paid or owed by the Company.
In the future, if it is determined that we meet the “more likely than not” threshold of utilizing our deferred tax assets, as required under ASC 740, then we may reverse some or all of our valuation allowance. Such valuation allowance and its potential reversal have no impact on the actual income taxes paid.
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.
Reference 1: http://www.xbrl.org/2003/role/disclosureRef