EFTA01367015.pdf

Amendment #4 Page 586 of 868 "Olt ,d Cannot' The movements of the valuation atlowance are as forows Year ended December 31, 2013 2014 LIDS UN Balance al tre begrring of tee year (10,160) (10,257) Decrease of velvet on allowance 221 428 Expuabon of tax losS — 24 Forego currency translaton adjustment (318) 38 Balance at the end of the year (10.2571 (9.767) The valuat on allowance as of December 31. 2013 and 2014 was unmanly provoled for the deferred income lax assets of Hendon Xilinspot and Honnon Baotou. which was at a cumuttve loss position In assessmg the realizaton of deferred income tax assets. management consden whether t 6 Tate likely than not that some portion or allot the deferred income tax assets will rot be realized The ult mate realization of deferred income tax assets is dependent upon the generation of futue taxable ncome dosing the periods in which those temporary dfferences become deductible or utilizable Management considers the sched.eed reversal of deferred tax liabilities (incluIng the impact of available carryforward periods). projected future taxable income and tax planning strateges in me kng the assessmert In view of the cumulative losses of 'Ionian Xibrigtole and Noreen BaDIC6 valuation allowance was provided against is deferred interne tax assets as of December 31. 2013 and 2014, which in the Judgment of the rrorogernere. are not more likely than not to be reaozed As of December 31. 2014, the Combined Entity s PRC entities had tax bases carry forwards of US426.640 Tax losses of US$1.960. US$7.697, USS9 946. USS3.590. and US$3.447 we covet d unused, by 2015, 2016, 2017, 2018 and 2019. respactrvely The Canaan recognizes unrecognized tax benefits h the amount of 11582.279 and US$2.270 relating to foreign currency exchange gains as of December 31. 2013 and 2014. respectively. which were included in otter non-cuTent liabilities The unrecognized tax tenefec represent the estimated income tax expenses the Company would be lectured to pay. should es foreign curency exchange gams be recognized in accordance with tax laws and regulations Nil merest and period expenses were recorded for the years ended December 31. 2013 and 2014. According to the PVC Tax Adrnmetrabon and Cdiecton Law, the statute d limitations is three years d me underpayment of taxes is due to computational errors made by the taxpayer a the vethroldirg agent. The statuteof Imitators van be extended to five years wider special circumstances where the urderpayment of taxes is more den RMB 100.000. In the case of transfer pricing issues, the statute of Imitations is 10 years The income tax returns of the Combned Entity are open to examination by the PRC state and local tax authOfiln for the tax years from 2010 to 2014 There is no statute of lineations in the caseates evasion. F.266 http://cfdocs.btogo.com:27638/cf/drv7/pub/edgar/2015/07/20/0001193125-15-256461/d78... 7/20/2015 CONFIDENTIAL - PURSUANT TO FED. R. CRIM. P. 6(e) DB-SDNY-0058543 CONFIDENTIAL SDNY_GM_00204727 EFTA01367015