Go Daddy 2015 Annual Report Download - page 96

Table of Contents
GoDaddy Inc.
Notes to Consolidated Financial Statements
(In millions, except share amounts which are reflected in thousands and per share amounts)
We enter into foreign exchange forward contracts with financial institutions to hedge certain forecasted sales transactions denominated in currencies other
than the United States (U.S.) dollar. We designate these forward contracts as cash flow hedges, which are recognized as either assets or liabilities at fair value. We
do not hold or issue derivative instruments for speculative or trading purposes. At December 31, 2015 , the total notional amount of such contracts was
$104.6 million , all having maturities of 12 months or less.
We reflect gains or losses on the effective portion of a cash flow hedge as a component of accumulated other comprehensive income. Gains and losses, once
realized, are recorded as a component of accumulated other comprehensive income and are amortized to revenue over the same period in which the underlying
hedged amounts are recognized. Any ineffective portion of gains or losses are recorded as other income (expense), net. Such gains or losses were immaterial
during all periods presented. Each period, we evaluate the effectiveness of each of our hedges. As of December 31, 2015 , all hedges were considered effective.
Leases
We lease office and data center space in various locations. Rent expense under operating leases is recognized on a straight-line basis over the lease term
taking into consideration rent abatements, scheduled rent increases and any lease incentives.
We record assets and liabilities for estimated construction costs incurred under build-to-suit lease arrangements to the extent we are involved in the
construction of structural improvements or take construction risk prior to commencement of a lease. Upon completion of the construction project, we evaluate our
level of continuing involvement in the facility. If we maintain significant continuing involvement, we continue to account for the facility as a financing obligation.
Otherwise, we record a sale of the facility back to the landlord, and accordingly, the related construction assets and liabilities are removed from our consolidated
financial statements.
Foreign Currency
Our functional currency is the U.S. dollar. Assets denominated in foreign currencies are remeasured into U.S. dollars at period-end exchange rates. Foreign
currency based revenue and expense transactions are measured at transaction date exchange rates. Foreign currency remeasurement gains and losses are recorded in
other income (expense), net and were $(3.5) million , $(3.0) million and $(0.7) million during 2015 , 2014 and 2013 , respectively.
The functional currency of certain of our foreign subsidiaries is their respective local currency. For these subsidiaries, we translate revenue and expense
transactions at average exchange rates. We translate assets and liabilities at period-end exchange rates and include foreign currency translation gains and losses as a
component of accumulated other comprehensive income. Such gains and losses were not material during any of the periods presented.
Revenue Recognition
Revenue is recorded when persuasive evidence of an arrangement exists, delivery of the product has occurred, the selling price is fixed or determinable and
collectability is reasonably assured. Payments received in advance of revenue recognition are recorded as deferred revenue.
We maintain a reserve to provide for refunds granted to customers. Our reserve is an estimate based on historical refund experience. Refunds reduce deferred
revenue at the time they are granted and result in a reduced amount of revenue recognized over the contract term of the applicable product compared to the amount
originally expected.
Consideration provided to customers for sales incentives or service disruption credits is recorded as a reduction of revenue at the later of the time the related
revenue is recognized or when such consideration is offered. Such incentives and credits were not material in any of the periods presented.
Revenue arrangements with multiple deliverables are divided into separate units of accounting if each deliverable has stand-alone value to the customer. The
majority of our revenue arrangements consist of multiple-element arrangements, with revenue for each unit of accounting recognized as the product or service is
delivered to the customer. Our multiple-element arrangements may include a combination of some or all of the following: domain registrations, website hosting
products, website building products, Secure Sockets Layer (SSL) certificates and other cloud-based products. Each of these products has stand-alone value and are
sold separately.
90