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EX-31.1 - SECTION 302 CERTIFICATION OF CHIEF EXECUTIVE OFFICER - DESTINY MEDIA TECHNOLOGIES INCexhibit31-1.htm
EX-31.2 - SECTION 302 CERTIFICATION OF CHIEF FINANCIAL OFFICER - DESTINY MEDIA TECHNOLOGIES INCexhibit31-2.htm
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EX-32.1 - SECTION 906 CERTIFICATION OF CHIEF EXECUTIVE OFFICER - DESTINY MEDIA TECHNOLOGIES INCexhibit32-1.htm
EX-32.2 - SECTION 906 CERTIFICATION OF CHIEF FINANCIAL OFFICER - DESTINY MEDIA TECHNOLOGIES INCexhibit32-2.htm
v2.4.0.6
INCOME TAXES
12 Months Ended
Aug. 31, 2012
INCOME TAXES [Text Block]

6. INCOME TAXES

The Company is subject to United States federal and state income taxes at an approximate rate of 34.0% and to Canadian federal and British Columbia provincial taxes in Canada at an approximate rate of 25.5% . The reconciliation of the provision (recovery) for income taxes at the United States federal statutory rate compared to the Company’s income tax expense is as follows:

    2012     2011  
    $     $  
             
Tax at U.S. statutory rates   262,000     276,000  
             
Permanent differences   17,000     6,000  
Effect of lower foreign tax in Canada   (62,000 )   (41,000 )
Effect of research tax credits claims filed in respect of prior years   (158,000 )   (248,000 )
Other adjustments and change to valuation allowance   149,000     180,000  
Provision (recovery) for deferred income taxes   208,000     173,000  

Included in other adjustments and change in valuation allowance for the year ended August 31, 2012 is $(4,000) (2011: $35,000) relating to the effect of changes in statutory tax rates, $(12,000) (2011: ($82,000)) for the effect of changes in foreign exchange rates, $(215,000) (2011: $Nil) in respect of a change in estimates and provisions and $380,000 (2011: 227,000) in respect of the change in valuation allowance, which includes the items noted below.

During the year ended August 31, 2011, the Company recorded an adjustment to future income tax assets of $486,000 in respect of amendments to prior years’ tax return filings, as approved by Canada Revenue Agency, to capitalize software development costs and eliminate the expiration of losses. As a result, the cumulative tax benefit increased. The Company has also increased the valuation allowance against these benefits and the investment tax credits approved.

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The Company has recognized a valuation allowance for those deferred tax assets for which realization is not more likely than not to occur.

During the year ended August 31, 2011, the Company decreased future income tax assets by $159,000 in respect of a provision for cross border tax issues. During the year ended August 31, 2012, this provision was reversed due to the resolution of these issues.

Significant components of the Company’s deferred tax assets as of August 31 are as follows:

    2012     2011  
    $      $  
Deferred tax assets:            
Net operating loss carryforwards   1,198,000     1,001,000  
Excess of book over tax depreciation   694,000     985,000  
Tax Credits carryforward   837,000     571,000  
Total deferred tax asset   2,729,000     2,557,000  
Valuation allowance   (1,782,000 )   (1,402,000 )
Net deferred tax asset   947,000     1,155,000  
Less: current portion   258,000     286,000  
Non-current   689,000     869,000  

Net income (loss) before income tax by geographic region is as follows:

    2012     2011  
    $     $  
             
United States   43,167     208,945  
Canada   727,836     602,563  
    771,003     811,508  

If not utilized to reduce future taxable income, the Company’s net operating loss carryforwards will expire as follows:

    Canada     United States  
    $     $  
2020 and thereafter       3,524,000  
        3,524,000