Google 2013 Annual Report Download - page 39

33
PART II
ITEM7.Management’sDiscussionandAnalysisofFinancialConditionandResultsofOperations
Stock-Based Compensation
Thefollowingtablepresentsourstock-basedcompensationfortheperiodspresented(dollarsinmillions):
Year Ended December31,
2011 2012 2013
Stock-basedcompensation(1) (2) $ 1,974 $ 2,523 $3,247
(1) These amounts are included in the previously discussed sections above, as unallocated items related to cost of revenues, research and
development,salesandmarketing,andgeneralandadministrativeexpenses.
(2) Stock-basedcompensationexpensesof$126millionand$21millionareincludedin“restructuringandrelatedcharges”abovefortheyears
endedDecember31,2012and2013.
Stock-basedcompensationincreased$724millionfrom2012to2013andasapercentageofconsolidatedrevenuesremained
atfrom2012to2013.Thisincreaseinexpenseswasprimarilyduetoanincreaseinheadcounttosupportourgrowingbusiness.
Stock-basedcompensationincreased$549millionfrom2011to2012andasapercentageofconsolidatedrevenuesremainedat
from2011to2012.Thisincreaseinexpenseswasprimarilyduetoadditionalstockawardsissuedtoexistingandnewemployees,
aswellasawardsissuedinconnectionwiththeacquisitionofMotorola.
Stock-basedcompensationexpensefortheMotorolaHomesegmentwasincludedinnetincome(loss)fromdiscontinuedoperations.
Weestimatestock-basedcompensationrelatedtoawardsgrantedthroughDecember31,2013tobeapproximately$3.1billion
in2014and$3.2billionthereafter.Thisestimatedoesnotincludeexpensestoberecognizedrelatedtoemployeestockawards
thataregrantedafterDecember31,2013ornon-employeestockawardsthathavebeenormaybegranted.Inaddition,tothe
extentforfeitureratesaredierentfromwhatwehaveanticipated,stock-basedcompensationrelatedtotheseawardswillbe
dierentfromourexpectations.
Interest and Other Income, Net
Interestandotherincome,net,decreased$96millionfrom2012to2013.Thisdecreasewasprimarilydrivenbyadecreaseinthe
gainondivestitureofbusinesses(otherthanMotorolaHome)of$245millionandadecreaseintherealizedgainoninvestments
of$81million,partiallyosetbyadecreaseinforeigncurrencyexchangelossof$152millionandanincreaseininterestincome
of$72million.
Interestandotherincome,net,increased$42millionfrom2011to2012.Thisincreasewasprimarilydrivenbyagainondivestiture
ofbusinessof$188millionin2012,animpairmentchargerelatedtoequityinvestmentsof$110millionin2011,partiallyoset
byanincreaseinforeigncurrencyexchangelossof$152millionandadecreaseininterestincomeof$99million.
Thecostsofourforeignexchangehedgingactivitiesthatwerecognizedtointerestandotherincome,net,areprimarilyafunction
of the notional amount of the option and forward contracts and their related duration, the movement of the foreign exchange
ratesrelativetothestrikepricesofthecontracts,aswellasthevolatilityoftheforeignexchangerates.
As we expand our international business, we believe costs related to hedging activities under our foreign exchange risk management
programmayincreaseindollaramountin2014andfutureperiods.
Provision for Income Taxes
Thefollowingtablepresentsourprovisionforincometaxes,andeectivetaxratefortheperiodspresented(dollarsinmillions):
Year Ended December31,
2011 2012 2013
Provision for income taxes $2,589 $2,598 $2,282
Eectivetaxrate 21.0% 19.4% 15.7%
ThefederalresearchanddevelopmentcreditexpiredonDecember31,2011.OnJanuary2,2013,theAmericanTaxpayerReliefAct
of2012wassignedintolaw.Underthisact,thefederalresearchanddevelopmentcreditwasretroactivelyextendedforamounts
paidorincurredafterDecember31,2011andbeforeJanuary1,2014.Theeectsofthesechangesinthetaxlawhaveresulted
inataxbenetwhichwasrecognizedintherstquarterof2013,thequarterinwhichthelawwasenacted.
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