Classmates.com 2010 Annual Report Download - page 123

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)
systems. 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; gains and losses on sales of assets;
and expenses incurred as a result of settlements, judgments, fines, penalties, assessments, or other resolutions related to litigation, arbitration,
investigations, disputes, or similar matters. General and administrative expenses also include expenses resulting from actual or potential
transactions such as business combinations, mergers, acquisitions, and financing transactions, including expenses for advisors and
representatives such as investment bankers, consultants, attorneys, and accounting firms.
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 on a straight-line basis 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. The Company uses the "with and without" approach in determining the
order in which tax attributes are utilized. As a result, the Company only recognizes a tax benefit from share-based payment awards in additional
paid-in capital in the consolidated balance sheets if an incremental tax benefit is realized after all other tax attributes currently available to the
Company have been utilized. In addition, the Company accounts for the indirect effects of share-based payment awards on other tax attributes in
the consolidated statements of operations.
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
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