Classmates.com 2009 Annual Report Download - page 121

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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)
personnel. In addition, general and administrative expenses include, among other costs, professional fees for legal, accounting and financial
services; insurance; occupancy and other overhead-related costs; office relocation costs; non-income taxes; and expenses incurred and credits
received as a result of certain legal settlements or reserves.
Stock-Based Compensation —The Company follows the provisions of ASC 718, Compensation-Stock Compensation , which requires the
measurement and recognition of compensation expense for all share-
based payment awards made to employees and directors including restricted
stock units, stock awards, stock options, and employee stock purchases.
ASC 718 requires companies to estimate the fair value of share-based payment awards on the grant date using an option-
pricing model. The
Company values its restricted stock units based on the grant-date closing price of the Company's common stock. The Company uses the Black-
Scholes option-pricing model for valuing stock options. The value of the portion of the award that is ultimately expected to vest is recognized as
an expense over the requisite service periods in the Company's consolidated statements of operations. ASC 718 also requires forfeitures to be
estimated at the time of grant in order to calculate the amount of share-based payment awards ultimately expected to vest.
Comprehensive Income (Loss) —The Company follows the provisions of ASC 220, Comprehensive Income,
which 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 unrealized gains or losses on short-term investments and derivatives, both net of tax, and foreign currency
translation.
Foreign Currency Translation —The Company accounts for foreign currency translation in accordance with ASC 830, Foreign Currency
Matters
. 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. The Company periodically hedges foreign currency translation risk.
Income Taxes —The Company accounts for income taxes under ASC 740, Income Taxes . Under ASC 740, 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 tax assets to the amount that is more likely than not to be realized. In evaluating the Company's ability to recover its deferred
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. In accordance with ASC 740, 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.
Earnings Per Share —The Company computes earnings per share in accordance with ASC 260, Earnings Per Share . ASC 260 provides
that unvested share-based payment awards that contain non-forfeitable rights to dividends are participating securities and shall be included in the
computation of earnings per share pursuant to the two-class method. The two-class method of computing earnings
F-18