Classmates.com 2008 Annual Report Download - page 115

Table of Contents
UNITED ONLINE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
1. DESCRIPTION OF BUSINESS, BASIS OF PRESENTATION, ACCOUNTING POLICIES, AND RECENT ACCOUNTING
PRONOUNCEMENTS (Continued)
employee share-based compensation, and to determine the subsequent impact on the APIC pool and consolidated statements of cash flows of the
tax effects of employee share-based payment awards that were outstanding upon adoption of SFAS No. 123R. In the June 2006 quarter, the
Company adopted the provisions of FSP No. SFAS 123(R)-3.
As a result of the adoption SFAS No. 123R, the Company's income before income taxes and net income for the year ended December 31,
2006 were $7.0 million and $5.1 million lower, respectively, than if the Company had continued to account for stock-based compensation under
APB Opinion No. 25. Basic net income per share and diluted net income per share for the year ended December 31, 2006 were $0.08 and $0.08
lower, respectively, than if the Company had continued to account for stock-based compensation under APB Opinion No. 25.
Comprehensive Income (Loss) —SFAS No. 130, Reporting Comprehensive Income, establishes standards for reporting comprehensive
income (loss) and its components in financial statements. Comprehensive income (loss), as defined, includes all changes in equity (net assets)
during a period from non-owner sources. For the Company, comprehensive income (loss) primarily consists of its reported net income (loss),
changes in net unrealized gains or losses on short-term investments and derivatives, and foreign currency translation.
Foreign Currency Translation —The Company accounts for foreign currency translation in accordance with SFAS No. 52, Foreign
Currency Translation . The functional currency of the Company's international subsidiaries is the local currency. The financial statements of
these subsidiaries are translated to U.S. Dollars using period-end rates of exchange for assets and liabilities, and average rates of exchange for
the period for revenues and expenses. Translation gains and losses are recorded in accumulated other comprehensive income (loss) as a
component of stockholders' equity in the consolidated balance sheets. We do not currently hedge foreign currency translation risk. The recent
increase in the value of the U.S. Dollar compared to the British Pound has had an adverse effect on the FTD segment's operating results for the
period from August 26, 2008 (date of acquisition) through December 31, 2008.
Income Taxes —The Company accounts for income taxes under SFAS No. 109, Accounting for Income Taxes . Under SFAS No. 109,
deferred tax assets and liabilities are determined based on differences between the financial reporting and tax basis of assets and liabilities and
are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company records a
valuation allowance to reduce its deferred income tax assets to the amount that is more likely than not to be realized. In evaluating the
Company's ability to recover its deferred income tax assets, the Company considers all available positive and negative evidence, including its
operating results, ongoing tax planning and forecasts of future taxable income on a jurisdiction-by-jurisdiction basis. The Company applies the
provisions of FASB Interpretation No. ("FIN") 48, Accounting for Uncertainty in Income Taxes—an interpretation of FASB Statement No. 109 .
Under FIN 48, the Company recognizes, in its consolidated financial statements, the impact of tax positions that are more likely than not to be
sustained upon examination based on the technical merits of the positions.
Net Income (Loss) Per Share —Basic net income (loss) per share is computed using the weighted-average number of common shares
outstanding during the period, net of shares subject to repurchase
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