|9 Months Ended|
Sep. 30, 2021
|Income Tax Disclosure [Abstract]|
7. Income taxes
The Company accounts for income taxes in accordance with ASC 740 — Income Taxes. Under ASC 740, income taxes are recognized for the amount of taxes payable or refundable for the current period and deferred tax liabilities and assets are recognized for the future tax consequences of transactions that have been recognized in the Company’s consolidated financial statements or tax returns. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is provided when it is more likely than not that some portion, or all, of the deferred tax asset will not be realized.
The Company accounts for uncertainties in income taxes in accordance with ASC 740-10 — Accounting for Uncertainty in Income Taxes. ASC 740-10 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. This accounting standard also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.
The Company recognizes interest and penalties on taxes, if any, within its income tax provision on its consolidated statements of comprehensive income.
In determining the interim provision for income taxes, the Company has historically calculated its income tax provision by applying an estimate of the annual effective tax rate for the full fiscal year to ordinary income or loss for the reporting period. For the three and nine months ended September 30, 2021, the Company utilized the discrete effective tax rate method, as allowed by ASC 740-270 — Income Taxes – Interim Reporting. Given the significant uncertainty with respect to the impact of the COVID-19 pandemic and related public health emergency on its supply chain and the developments during the three months ended September 30, 2021 in its ability to forecast the supply and cost of semiconductor chips, the Company was not able to reliably estimate its annual effective income tax rate for the year ending December 31, 2021. The discrete method treats the year-to-date period as if it were the annual period and determines the income tax expense or benefit on that basis.
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