Equity in Losses of Affiliates and Impairments:
Equity in losses of affiliates and impairments, results from the Company's minority ownership in certain investments that are accounted for under the equity method and impairments on its equity method and cost method investments. Under the equity method of accounting, the Company's proportionate share of each affiliate's operating income or losses is included in equity in losses of affiliates. Equity in losses of affiliates and impairments was
$4.1 millionand $4.3 millionfor the fiscal years ended July 31, 2012and 2011, respectively. For the fiscal years ended July 31, 2012and 2011, the Company recorded its proportionate share of the affiliates' losses of $1.2 millionand $1.8 million, respectively. During the fiscal year ended July 31, 2012and 2011 the Company also recorded impairment charges of $2.9 millionand $2.5 million, respectively, on certain investments included in the @Ventures portfolio of companies. The Company assesses the need to record impairment losses on its investments and records such losses when the impairment of an investment is determined to be other than temporary in nature. The process of assessing whether a particular equity investment's net realizable value is less than its carrying cost requires a significant amount of judgment. In making this judgment, the Company carefully considers the investee's cash position, projected cash flows (both short and long-term), financing needs, recent financing rounds, most recent valuation data, the current investing environment, management/ownership changes and competition. The valuation process is based primarily on information that the Company requests from these privately held companies and is not subject to the same disclosure and audit requirements as the reports required of U.S. public companies. During the third quarter of 2012, the Company became aware that there may be indicators of impairment for certain investments in the @Ventures portfolio of companies. The Company completed its evaluation of impairment of these investments and based on the Company's evaluation, it recorded a $2.9 millionimpairment charge during the fiscal year ended July 31, 2012. Estimating the net realizable value of investments in privately held early-stage technology companies is inherently subjective and has contributed to volatility in our reported results of operations in the past and may negatively impact our results of operations in the future. We may incur additional impairment charges to our investments in privately held companies, which could have an adverse impact on our future results of operations.
Income Tax Expense:
During the fiscal year ended
July 31, 2012, the Company recorded income tax expense of approximately $3.0 millioncompared to income tax expense of $0.8 millionfor the prior fiscal year. For the fiscal years ended July 31, 2012and 2011, the Company was profitable in certain jurisdictions where the Company operates, resulting in an income tax expense using the enacted tax rates in those jurisdictions. Additionally, net tax expense for the fiscal year ended July 31, 2011includes the reversal of an uncertain tax position reserve of $3.7 million.