TYRATECH • ANNUAL REPORT 2014 • PAGE 31
those shares expected to vest, with forfeitures based upon future
expectations.
(m) Research and Development
Research and development costs and expenses are expensed
as incurred. Research and development costs and expenses
for the year ended 31 December 2014 amounted to $1.6 million
(2013: $1.8 million) after charging $0.2 million (2013: $0.4 million)
to cost of revenue.
(n) Income Taxes
Income taxes are accounted for under the asset and liability
method. Deferred tax assets and liabilities are recognised for the
future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and
liabilities and their respective tax basis and operating losses and
tax credit carry forwards. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable
income 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 recognised
in income in the period that includes the enactment date.
Valuation allowances are recorded when necessary to reduce
deferred tax assets to the amount expected to be realised.
The Company adopted the provisions of Financial Accounting
Standards Board (FASB) Accounting Standards Codification
(ASC) 740, Income Taxes, on 1 January 2009. As required by
the uncertain tax position guidance of ASC 740, the Company
recognises the financial statement benefit of a tax position only
after determining that the relative tax authority would morelikely-
than-not sustain the position following an audit. For tax
positions meeting the more-likely-than-not threshold, the amount
recognised in the financial statements is the largest benefit that
has a greater than fifty percent likelihood of being realised upon
ultimate settlement with the relevant tax authority. As of 31
December 2014 and 31 December 2013, the Company did not
record any assets for unrecognised tax benefits.
(o) Use of Estimates
The preparation of financial statements in conformity with U.S.
GAAP requires management to make estimates and assumptions
that affect the amounts reported in the consolidated financial
statements and accompanying disclosures. Significant estimates
and assumptions made by management are used for but not
limited to, revenue recognition, the useful lives of property and
equipment, volatility used in the valuation of the Company's
stock appreciation rights and warrants, accrued expenses, and
valuation allowance on deferred tax assets. Although these
estimates are based on management's best knowledge of
current events and actions the Company may undertake in the
future, actual results ultimately may differ from the estimates.
(p) Fair Value of Financial Instruments
Financial instruments, which potentially subject the Company
to significant concentrations of credit risk, consist principally
of cash and cash equivalents and accounts receivable.
The carrying amounts of cash and cash equivalents and of
accounts receivable, accounts payable and accrued expenses
approximate to fair value because of the short term maturity of
these items.
(q) Accounting Pronouncements Not Yet Adopted
The FASB recently issued Accounting Standards Update (ASU)
2014-09, Revenue from Contracts with Customers, to replace
and improve nearly all existing revenue recognition guidance.
The new standard is the culmination of longstanding joint efforts
by both the FASB and the IASB, which also issued IFRS 15 with the
same title.
The ASU is effective for public entities for annual reporting periods
beginning after 15 December 2016, including interim periods
therein. Early application is not permitted for public entities.
Entities are permitted to apply the new revenue standard
either retrospectively, subject to some practical expedients, or
through an alternative transition method. The Company has
not yet determined the potential impact of this recently issued
pronouncement.
(2) LIQUIDITY AND CAPITAL RESOURCES
The Company's operations have been funded through a
combination of common stock issuances, product sales,
