P AR T I assessing the need for the valuation allowance  we cannot assure you that we would not need to increase the valuation allowance to  cover additional deferred tax assets that may not be realizable. Any increase in the valuation allowance could have a material adverse  effect on our income tax provision and net income in the period in which such determination is made.  We had a valuation allowance of NT$182 million (US$6.0 million) on our deferred tax asset balance as of December 31   2011. We do not have a full valuation allowance on the deferred tax asset  as we believe these benefits will be partially realizable  based on our projection of future operating income. If we experience a significant decrease in our future operating income  our ability  to realize the deferred tax assets could be negatively impacted  and thus an increase in the valuation allowance might be required.  Any tax credits arising from purchases of machinery  equipment and technology  research and development expenditures   personnel training  and investments in important technology based enterprises are recognized using the flow through method.  Adjustments of prior years’ tax liabilities are added to or deducted from the current year’s tax provision. Under R.O.C. GAAP   income taxes of 10% on undistributed earnings are recorded in the year of stockholders approval which is the year subsequent to the  year the earnings are generated. Under US GAAP  the 10% tax on unappropriated earnings is accrued during the period the earnings  arise and adjusted to the extent that distributions are approved by the stockholders in the following year.  Our Financial Reporting Obligations  Effective from January 1  2007  we adopted a guidance prescribing the recognition threshold and measurement attribute for  the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return under U.S. GAAP.  This guidance also provides guidance on derecognition  classification  interest and penalties  disclosure and transition. The evaluation  of a tax position in accordance with this guidance is a two step process. The first step is recognition  where we evaluate whether an  individual tax position has a likelihood of greater than 50% of being sustained upon examination based on the technical merits of the  position  including resolution of any related appeals or litigation processes. For tax positions that are currently estimated to have a  less than 50% likelihood of being sustained  zero tax benefit is recorded. For tax positions that have met the recognition threshold in  the first step  we perform the second step of measuring the benefit to be recorded. The actual benefits ultimately realized may differ  from the estimates. The adoption of this guidance did not have a material impact on our results of operation  financial position and  cash flows. We did not identify significant unrecognized tax benefits for the year ended December 31  2009  2010 and 2011. It is  highly unlikely that we will incur any interests or penalties related to potential underpaid income tax expenses.  Our ongoing financial reporting in our Form 20-F annual reports and interim financial reporting furnished to the SEC on  Form 6-K had been based on U.S. GAAP through fiscal year 2007. Beginning with our first quarter interim financial report furnished  on Form 6-K and our Form 20-F annual report for fiscal year 2008  we prepared our financial statements under R.O.C. GAAP  with  reconciliations to U.S. GAAP.  A. Operating Results  The following table sets forth our revenues  operating costs and expenses  income from operations and other financial data for  the periods indicated.  74