Google 2012 Annual Report Download - page 74

68 GOOGLE INC. |Form10-K
PART II
ITEM8.Notes to Consolidated Financial Statements
Other
We are also regularly subject to claims, suits, government investigations, and other proceedings involving competition and
antitrust (such as the pending investigations by the FTC and the EC described above), intellectual property, privacy, tax, labor
and employment, commercial disputes, content generated by our users, goods and services off ered by advertisers or publishers
using our platforms, personal injury, consumer protection, and other matters. Such claims, suits, government investigations, and
other proceedings could result in fi nes, civil or criminal penalties, or other adverse consequences.
Certain of our outstanding legal matters include speculative claims for substantial or indeterminate amounts of damages. We
record a liability when we believe that it is both probable that a loss has been incurred, and the amount can be reasonably
estimated. We evaluate, on a monthly basis, developments in our legal matters that could aff ect the amount of liability that has
been previously accrued, and make adjustments as appropriate. Signifi cant judgment is required to determine both likelihood of
there being and the estimated amount of a loss related to such matters.
With respect to our outstanding legal matters, based on our current knowledge, we believe that the amount or range of reasonably
possible loss will not, either individually or in the aggregate, have a material adverse eff ect on our business, consolidated fi nancial
position, results of operations, or cash fl ows. However, the outcome of such legal matters is inherently unpredictable and subject
to signifi cant uncertainties.
We expense legal fees in the period in which they are incurred.
Income Taxes
We are under audit by the Internal Revenue Service (IRS) and various other tax authorities. We have reserved for potential
adjustments to our provision for income taxes that may result from examinations by, or any negotiated agreements with, these
tax authorities, and we believe that the fi nal outcome of these examinations or agreements will not have a material eff ect on our
results of operations. If events occur which indicate payment of these amounts is unnecessary, the reversal of the liabilities would
result in the recognition of tax benefi ts in the period we determine the liabilities are no longer necessary. If our estimates of the
federal, state, and foreign income tax liabilities are less than the ultimate assessment, a further charge to expense would result.
NOTE12. Stockholders’ Equity
Convertible Preferred Stock
Our board of directors has authorized 100,000,000 shares of convertible preferred stock, $0.001 par value, issuable in series. At
December31,2011 and 2012, there were no shares issued or outstanding.
ClassA and Class B Common Stock
Our board of directors has authorized two classes of common stock, ClassA and Class B. At December31, 2012, there were
9,000,000,000 and 3,000,000,000 shares authorized and there were 267,448,281 and 62,530,474 shares outstanding of ClassA
and Class B common stock, $0.001 par value. The rights of the holders of ClassA and Class B common stock are identical, except
with respect to voting. Each share of ClassA common stock is entitled to one vote per share. Each share of Class B common stock
is entitled to 10 votes per share. Shares of Class B common stock may be converted at any time at the option of the stockholder
and automatically convert upon sale or transfer to ClassA common stock. We refer to ClassA and Class B common stock as
common stock throughout the notes to these fi nancial statements, unless otherwise noted.
Stock Dividend
In April2012, our board of directors approved amendments to our certifi cate of incorporation that would, among other things,
create a new class of non-voting capital stock (Class C capital stock).The amendments authorized 3billion shares of Class C capital
stock and also increased the authorized shares of ClassA common stock from 6billion to 9billion. The amendments are refl ected in
our Fourth Amended and Restated Certifi cate of Incorporation (New Charter), the adoption of whichwas approved by stockholders
at our 2012 Annual Meeting of Stockholders held on June21, 2012. We have announced the intention of our board of directors
to consider a distribution of shares of the ClassC capital stock as a dividend to our holders of ClassA and Class B common stock
(Dividend).The Class C capital stock will have no voting rights, except as required by applicable law. Except as expressly provided
in the New Charter, shares of Class C capital stock will have the same rights and privileges and rank equally, share ratably and be
identical in all other respects to the shares of ClassA common stock and Class B common stock as to all matters.
The par value per share of our shares of ClassA common stock and Class B common stock will remain unchanged at $0.001 per
share after the Dividend. Onthe eff ective date of the Dividend, there will be a transfer between retained earnings and common
stock and the amount transferred will be equal to the $0.001 par value of the Class C capital stock that is issued.We will give
retroactive eff ect to prior period share and per share amounts in our consolidated fi nancial statements for the eff ect of the
Dividend, such that prior periods are comparable to current period presentation.
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