Classmates.com 2010 Annual Report Download - page 124

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)
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 the Company's tax positions that are more likely than not to be sustained upon examination based on the technical merits of the
positions. The Company recognizes interest and penalties for uncertain tax positions in income tax expense.
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 per share is an earnings
allocation formula that determines earnings per share for common stock and any participating securities according to dividends declared
(whether paid or unpaid) and participation rights in undistributed earnings. Certain of the Company's restricted stock units are considered
participating securities because they contain a non-forfeitable right to dividends irrespective of whether the awards ultimately vest.
Legal Contingencies —The Company is currently involved in certain legal proceedings and investigations. The Company records liabilities
related to pending matters when an unfavorable outcome is deemed probable and management can reasonably estimate the amount of loss. As
additional information becomes available, the Company continually assesses the potential liability related to such pending litigation.
Operating Leases —The Company leases office space, data centers and certain office equipment under operating lease agreements with
original lease periods of up to ten years. Certain of the lease agreements contain rent holidays and rent escalation provisions. Rent holidays and
rent escalation provisions are considered in determining straight-line rent expense to be recorded over the lease term. The lease term begins on
the date of initial possession of the leased property for purposes of recognizing lease expense on a straight-line basis over the term of the lease.
Lease renewal periods are considered on a lease-by-lease basis and are generally not included in the initial lease term.
Recent Accounting Pronouncements
Business Combinations —In December 2010, the FASB issued Accounting Standards Updates ("ASU") No. 2010-29, Disclosure of
Supplementary Pro Forma Information for Business Combinations , as codified in ASC 805. The amendments in this update specify that if a
public entity presents comparative financial statements, the entity should disclose revenue and earnings of the combined entity as though the
business combination(s) that occurred during the current year had occurred as of the beginning of the comparable prior annual reporting period
only. The amendments also expand the supplemental pro forma disclosures to include a description of the nature and amount of material,
nonrecurring pro forma adjustments directly attributable to the business combination included in the reported pro forma revenue and earnings.
The amendments in this update are effective prospectively for business combinations for which the acquisition date is on or after the beginning
of the first annual reporting period beginning on or after December 15, 2010. Early adoption is permitted. ASU
F-18