AT&T Wireless 2013 Annual Report Download - page 48

Notes to Consolidated Financial Statements (continued)
Dollars in millions except per share amounts
46 | AT&T Inc.
Pension and Other Postretirement Benefits See
Note 12 for a comprehensive discussion of our pension
and postretirement benefit expense, including a discussion
of the actuarial assumptions and our policy for recognizing
the associated gains and losses.
NOTE 2. EARNINGS PER SHARE
A reconciliation of the numerators and denominators of
basic earnings per share and diluted earnings per share for
net income for the years ended December 31, 2013, 2012
and 2011, is shown in the table below:
Year Ended December 31, 2013 2012 2011
Numerators
Numerator for basic earnings
per share:
Net income $18,553 $7,539 $4,184
Net income attributable to
noncontrolling interest (304) (275) (240)
Net income attributable to AT&T 18,249 7,264 3,944
Dilutive potential common shares:
Share-based payment 12 12 11
Numerator for diluted earnings
per share $18,261 $7,276 $3,955
Denominators (000,000)
Denominator for basic earnings
per share:
Weighted-average number of
common shares outstanding 5,368 5,801 5,928
Dilutive potential common
shares:
Share-based payment
(in shares) 17 20 22
Denominator for diluted
earnings per share 5,385 5,821 5,950
Basic earnings per share
attributable to AT&T $ 3.39 $ 1.25 $ 0.66
Diluted earnings per share
attributable to AT&T $ 3.39 $ 1.25 $ 0.66
At December 31, 2013, 2012 and 2011, we had issued and
outstanding options to purchase approximately 12 million,
17 million, and 66 million shares of AT&T common stock.
The exercise prices of 3 million, 3 million, and 40 million
shares in 2013, 2012, and 2011 were above the average
market price of AT&T stock for the respective periods.
Accordingly, we did not include these amounts in
determining the dilutive potential common shares.
sum-of-the-months-digits method of amortization over
the period in which those relationships are expected
to contribute to our future cash flows. The remaining
finite-lived intangible assets are generally amortized
using the straight-line method.
Advertising Costs We expense advertising costs for
advertising products and services or for promoting our
corporate image as we incur them (see Note 15).
Traffic Compensation Expense We use various
estimates and assumptions to determine the amount
of traffic compensation expense recognized during any
reporting period. Switched traffic compensation costs are
accrued utilizing estimated rates and volumes by product,
formulated from historical data and adjusted for known
rate changes. Such estimates are adjusted monthly to
reflect newly available information, such as rate changes
and new contractual agreements. Bills reflecting actual
incurred information are generally not received within
three months subsequent to the end of the reporting period,
at which point a final adjustment is made to the accrued
switched traffic compensation expense. Dedicated traffic
compensation costs are estimated based on the number
of circuits and the average projected circuit costs.
Foreign Currency Translation We are exposed to
foreign currency exchange risk through our foreign
affiliates and equity investments in foreign companies.
Our foreign subsidiaries and foreign investments generally
report their earnings in their local currencies. We translate
our share of their foreign assets and liabilities at exchange
rates in effect at the balance sheet dates. We translate our
share of their revenues and expenses using average rates
during the year. The resulting foreign currency translation
adjustments are recorded as a separate component of
accumulated other comprehensive income (accumulated
OCI) in the accompanying consolidated balance sheets.
We do not hedge foreign currency translation risk in the
net assets and income we report from these sources.
However, we do hedge a portion of the foreign currency
exchange risk involved in anticipation of highly probable
foreign currency-denominated transactions, which we
explain further in our discussion of our methods of
managing our foreign currency risk (see Note 10).
Employee Separations We established obligations for
expected termination benefits provided under existing
plans to former or inactive employees after employment
but before retirement. These benefits include severance
payments, workers’ compensation, disability, medical
continuation coverage and other benefits. During 2013,
due to initiatives to streamline the business, we accrued
$251 of anticipated employee separation costs.
At December 31, 2013, we have severance accruals
of $349, and at December 31, 2012, we had severance
accruals of $120.