Quarterly report pursuant to Section 13 or 15(d)

7. Deferred Tax Assets

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7. Deferred Tax Assets
 3 Months Ended
Jun. 30, 2017
Deferred Tax Assets  
Deferred Tax Assets

BMBM and FFIN are subject to taxation in the U.S. Freedom RU, FFIN Bank and FSS are subject to taxation in the Russian Federation. Freedom KZ and KZ Branch are subject to taxation in Kazakhstan.

 

The tax rate used for reconciliations for the three months ended June 30, 2017 and March 31, 2017, is the 20% corporate tax rate payable by corporate entities in the Russian Federation and the Republic of Kazakhstan on taxable profits under tax law in those jurisdictions.

 

Deferred tax assets and liabilities subject to taxation in the Russian Federation and Republic of Kazakhstan comprise:

 

   

June 30,

2017

    

March 31,

2017

  
             
Deferred tax asset:            
             
Tax losses carryforward   $ 2,061     $ 2,398  
Accrued liabilities     19       20  
Revaluation on trading securities     -       76  
                 
      2,080       2,494  
Valuation allowance     (1,265 )     (1,468 )
                 
Deferred tax assets   $ 815     $ 1,026  
                 
Deferred tax liabilities:                
                 
Revaluation on trading securities   $ 14     $ -  
                 
Deferred tax liabilities     14       -  
                 
Net deferred tax assets   $ 801     $ 1,026  

 

 

The tax rate used for reconciliations for the three months ended June 30, 2017 and March 31, 2017, is the 20% corporate tax rate payable by corporate entities in the Russian Federation and the Republic of Kazakhstan on taxable profits under tax law in those jurisdictions. During the three-months ended June 30, 2017 and 2016, the effective tax rate was equal to (0.4%) and 27%, respectively, primarily due to non-taxable gain on trading securities in Freedom KZ in the amounts of $7,795 and $1,320, respectively. During the quarters ended June 30, 2017 and 2016, the Company recognized net losses from its Freedom RU trading operations in the amounts of $807 and $1,809, respectively, which are deductible for tax purposes. During the quarter ended June 30, 2017, the Company realized net income before income tax of $8,314, primarily from non-taxable revenues generated from the Company’s Freedom KZ’s trading operations, and utilized tax loss carryforwards of $203. This resulted in the Company realizing an income tax benefit during the three months ended June 30, 2017 of $31. During the quarter ended June 30, 2016, the Company realized a net loss before income tax of $1,698 resulting in an income tax benefit of $463.

 

BMBM and FFIN are subject to United States federal and state income taxes at an approximate rate of 34% and 3.3%, respectively.

 

Deferred tax assets and liabilities subject to taxation of United States federal and state income taxes comprise:

 

   

June 30,

2017

  

March 31,

2017
         
Deferred tax asset:                
                 
Net operating loss carryforward   $ 509     $ 398  
      509       398  

Valuation allowance

     (509 )     (398 )
                 
Deferred tax assets   $ —       $ —