Google 2013 Annual Report Download - page 58

52 GOOGLE INC.
PART II
ITEM8.NotestoConsolidatedFinancialStatements
Stock-based Compensation
WehaveelectedtousetheBlack-Scholes-Merton(BSM)optionpricingmodeltodeterminethefairvalueofstockoptionsonthe
datesofgrant.Restrictedstockunits(RSUs)aremeasuredbasedonthefairmarketvaluesoftheunderlyingstockonthedates
ofgrant.Sharesareissuedonthevestingdatesnetoftheminimumstatutorytaxwithholdingrequirementstobepaidbyuson
behalfofouremployees.Asaresult,theactualnumberofsharesissuedwillbefewerthantheactualnumberofRSUsoutstanding.
Furthermore,werecordtheliabilityforwithholdingamountstobepaidbyusasareductiontoadditionalpaid-incapitalwhen
paid.Also,werecognizestock-basedcompensationusingthestraight-linemethod.
Weincludeaspartofcashowsfromnancingactivitiesthebenetsoftaxdeductionsinexcessofthetax-eectedcompensation
oftherelatedstock-basedawardsforoptionsexercisedandRSUsvestedduringtheperiod.DuringtheyearsendedDecember31,
2011,December31,2012,andDecember31,2013,theamountofcashreceivedfromtheexerciseofstockoptionswas$621million,
$736million,and$1,174million,andthetotaldirecttaxbenetrealized,includingtheexcesstaxbenet,fromstock-basedaward
activitieswas$451million,$747million,and$1,195million.Wehaveelectedtoaccountfortheindirecteectsofstock-based
awards-primarilytheresearchanddevelopmenttaxcredit-throughtheConsolidatedStatementsofIncome.
FortheyearsendedDecember31,2011,December31,2012,andDecember31,2013,werecognizedstock-basedcompensation
expenseandrelatedtaxbenetsof$1,974millionand$413million,$2,649millionand$591million,and$3,268millionand
$720million.Additionally,netincome(loss)fromdiscontinuedoperationsfortheyearendedDecember31,2012andDecember31,
2013includesstock-basedcompensationexpenseandrelatedtaxbenetsof$43millionand$11million,and$75millionand
$24million,respectively.
Certain Risks and Concentrations
Ourrevenuesareprimarilyderivedfromonlineadvertising,themarketforwhichishighlycompetitiveandrapidlychanging.In
addition,ourrevenuesaregeneratedfromamultitudeofverticalmarketsegmentsincountriesaroundtheworld.Signicant
changesinthisindustryorchangesincustomerbuyingoradvertiserspendingbehaviorcouldadverselyaectouroperating
results.Inaddition,forourMotorolaMobilesegment,thevastmajorityofourMotorolaproducts(otherthansomeprototypes)
aremanufacturedoutsidetheU.S.,primarilyinChinaandBrazil.
Financialinstrumentsthatpotentiallysubjectustoconcentrationsofcreditriskconsistprincipallyofcashequivalents,marketable
securities,foreignexchangecontracts,andaccountsreceivable.Cashequivalentsandmarketablesecuritiesconsistprimarilyoftime
deposits,moneymarketandotherfunds,includingcashcollateralreceivedrelatedtooursecuritieslendingprogram,highlyliquid
debtinstrumentsoftheU.S.governmentanditsagencies,debtinstrumentsissuedbyforeigngovernmentsandmunicipalitiesin
theU.S.,corporatesecurities,mortgage-backedsecurities,andasset-backedsecurities.Foreignexchangecontractsaretransacted
withvariousnancialinstitutionswithhighcreditstanding.Accountsreceivablearetypicallyunsecuredandarederivedfrom
revenuesearnedfromcustomerslocatedaroundtheworld.In2011,2012,and2013,wegeneratedapproximately46%,47%,
and45%ofourrevenuesfromcustomersbasedintheU.S.,withthemajorityofcustomersoutsideoftheU.S.locatedinEurope
andJapan.ManyofourGoogleNetworkMembersareintheinternetindustry.Weperformongoingevaluationstodetermine
customercreditandwelimittheamountofcreditweextend,butgenerallywedonotrequirecollateralfromourcustomers.
Wemaintainreservesforestimatedcreditlossesandtheselosseshavegenerallybeenwithinourexpectations.
Noindividualcustomerorgroupsofaliatedcustomersrepresentedmorethan10%ofourrevenuesin2011,2012,and2013.
Fair Value of Financial Instruments
Ournancialassetsandnancialliabilitiesthatincludecashequivalents,marketablesecurities,andforeigncurrencyandinterest
ratederivativecontractsaremeasuredandrecordedatfairvalueonarecurringbasis.Wemeasurecertainotherassetsincluding
ournon-marketableequitysecuritiesatfairvalueonanonrecurringbasiswhentheyaredeemedtobeother-than-temporarily
impaired.Ourothercurrentnancialassetsandourothercurrentnancialliabilitieshavefairvaluesthatapproximatetheir
carryingvalueandarethereforenotrecordedatfairvalue.
Cash, Cash Equivalents, and Marketable Securities
Weinvestourexcesscashprimarilyintimedeposits,moneymarketandotherfunds,includingcashcollateralreceivedrelatedto
oursecuritieslendingprogram,highlyliquiddebtinstrumentsoftheU.S.governmentanditsagencies,debtinstrumentsissuedby
foreigngovernmentsandmunicipalitiesintheU.S.,corporatesecurities,mortgage-backedsecurities,andasset-backedsecurities.
Weclassifyallhighlyliquidinvestmentswithstatedmaturitiesofthreemonthsorlessfromdateofpurchaseascashequivalents
andallhighlyliquidinvestmentswithstatedmaturitiesofgreaterthanthreemonthsasmarketablesecurities.
Wedeterminetheappropriateclassicationofourinvestmentsinmarketablesecuritiesatthetimeofpurchaseandreevaluate
suchdesignationateachbalancesheetdate.Wehaveclassiedandaccountedforourmarketablesecuritiesasavailable-for-sale.
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