Arrow Electronics 2011 Annual Report Download - page 50

ARROW ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share data)
48
Foreign Currency Translation
The assets and liabilities of international operations are translated at the exchange rates in effect at the balance sheet date, with
the related translation gains or losses reported as a separate component of shareholders' equity in the company's consolidated
balance sheets. The results of international operations are translated at the monthly average exchange rates.
Income Taxes
Income taxes are accounted for under the liability method. Deferred income taxes reflect the tax consequences on future years of
differences between the tax bases of assets and liabilities and their financial reporting amounts. The carrying value of the company's
deferred tax assets is dependent upon the company's ability to generate sufficient future taxable income in certain tax jurisdictions.
Should the company determine that it is more likely than not that some portion or all of its deferred tax assets will not be realized,
a valuation allowance to the deferred tax assets would be established in the period such determination was made.
It is the company's policy to provide for uncertain tax positions and the related interest and penalties based upon management's
assessment of whether a tax benefit is more likely than not to be sustained upon examination by tax authorities. At December 31,
2011, the company believes it has appropriately accounted for any unrecognized tax benefits. To the extent the company prevails
in matters for which a liability for an unrecognized tax benefit is established or is required to pay amounts in excess of the liability,
the company's effective tax rate in a given financial statement period may be affected.
Net Income Per Share
Basic net income per share is computed by dividing net income attributable to shareholders by the weighted average number of
common shares outstanding for the period. Diluted net income per share reflects the potential dilution that would occur if securities
or other contracts to issue common stock were exercised or converted into common stock.
Comprehensive Income
Comprehensive income consists of consolidated net income, foreign currency translation adjustments, unrealized gains or losses
on investment securities and interest rate swaps designated as cash flow hedges, in addition to other employee benefit plan items.
Unrealized gains or losses on investment securities are net of any reclassification adjustments for realized gains or losses included
in consolidated net income. Foreign currency translation adjustments included in comprehensive income were not tax effected
as investments in international affiliates are deemed to be permanent. All other comprehensive income items are net of related
income taxes.
Stock-Based Compensation
The company records share-based payment awards exchanged for employee services at fair value on the date of grant and expenses
the awards in the consolidated statements of operations over the requisite employee service period. Stock-based compensation
expense includes an estimate for forfeitures and is generally recognized over the vesting period of the award on a straight-line
basis. Stock-based compensation expense related to awards with a market or performance condition is generally recognized over
the vesting period of the award utilizing the graded vesting method. The company recorded, as a component of selling, general
and administrative expenses, amortization of stock-based compensation of $39,225, $34,613, and $33,017 in 2011, 2010, and
2009, respectively.
Segment Reporting
Operating segments are defined as components of an enterprise for which separate financial information is available that is evaluated
regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. The company's
operations are classified into two reportable business segments: global components and global ECS.
Revenue Recognition
The company recognizes revenue when there is persuasive evidence of an arrangement, delivery has occurred or services are
rendered, the sales price is determinable, and collectibility is reasonably assured. Revenue typically is recognized at time of
shipment. Sales are recorded net of discounts, rebates, and returns, which historically have not been material.