Costco 2014 Annual Report Download - page 56

Interest Income and Other, Net
Interest income and other, net includes:
2014 2013 2012
Interest income ....................................................................................................................
.
$ 52 $ 44 $ 49
Foreign-currency transactions gains, net ........................................................................
.
26
39 40
Other, net .............................................................................................................................
.
12
14 14
Interest income and other, net ...................................................................................
.
$90
$97 $103
Income Taxes
The Company accounts for income taxes using the asset and liability method. Deferred tax assets and
liabilities are recognized for the future tax consequences attributed to differences between the financial
statement carrying amounts of existing assets and liabilities and their respective tax bases and tax credits
and loss carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary differences and carry-forwards
are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the enactment date. A valuation allowance is
established when necessary to reduce deferred tax assets to amounts expected to be realized.
The determination of the Company’s provision for income taxes requires significant judgment, the use of
estimates, and the interpretation and application of complex tax laws. Significant judgment is required in
assessing the timing and amounts of deductible and taxable items and the probability of sustaining
uncertain tax positions. The benefits of uncertain tax positions are recorded in the Company’s
consolidated financial statements only after determining a more-likely-than-not probability that the
uncertain tax positions will withstand challenge, if any, from tax authorities. When facts and circumstances
change, the Company reassesses these probabilities and records any changes in the consolidated
financial statements as appropriate. See Note 8 for additional information.
Net Income per Common Share Attributable to Costco
The computation of basic net income per share uses the weighted average number of shares that were
outstanding during the period. The computation of diluted net income per share uses the weighted
average number of shares in the basic net income per share calculation plus the number of common
shares that would be issued assuming exercise and vesting to the participant of all potentially dilutive
common shares outstanding using the treasury stock method for shares subject to stock options and
RSUs and the “if converted” method for the convertible note securities.
Stock Repurchase Programs
Repurchased shares of common stock are retired, in accordance with the Washington Business
Corporation Act. The par value of repurchased shares is deducted from common stock and the excess
repurchase price over par is deducted by allocation to both additional paid-in capital and retained
earnings. The amount allocated to additional paid-in capital is calculated as the current value of additional
paid-in capital per share outstanding and is applied to the number of shares repurchased. Any remaining
amount is allocated to retained earnings. See Note 6 for additional information.
Recently Adopted Accounting Pronouncements
In February 2013, the Financial Accounting Standards Board (FASB) issued guidance related to
reclassifications out of accumulated other comprehensive income. Disclosure is required of the net
income line items impacted by significant reclassifications out of accumulated other comprehensive
income if the item is reclassified in its entirety. For other amounts that are not required to be reclassified in
their entirety to net income, cross-references to other disclosures required under U.S. GAAP are required.
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