LinkedIn 2012 Annual Report Download - page 79

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amortization of deferred commissions is included in sales and marketing expense in the accompanying
consolidated statements of operations.
Derivative Financial Instruments
The Company enters into foreign currency derivative contracts with financial institutions to reduce
the risk that its cash flows and earnings will be adversely affected by foreign currency exchange rate
fluctuations. The Company’s foreign currency derivative contracts, which are not designated as hedging
instruments, are used to reduce the exchange rate risk associated with its foreign currency denominated
monetary assets and liabilities. The Company’s program is not designated for trading or speculative
purposes. The foreign currency derivative contracts that were not settled as of December 31, 2012 and
2011 are recorded at fair value in the consolidated balance sheets. Foreign currency derivative contracts
are marked-to-market at the end of each reporting period and the related gains and losses are recognized
in other income (expense), net in the accompanying consolidated statements of operations to offset the
gains or losses of the related hedged items. The Company recognized a net realized and unrealized loss of
$2.2 million in 2012 and an immaterial net realized and unrealized gain in 2011 on its foreign currency
forward contracts. The Company did not have any foreign currency derivative contracts in 2010. As of
December 31, 2012 and 2011, we had outstanding foreign currency forward contracts with a total notional
amount of $83.5 million and $34.1 million, respectively.
Property and Equipment
Property and equipment are stated at cost, less accumulated depreciation and amortization.
Depreciation and amortization is computed using the straight-line method over the estimated useful lives
of the assets, which range from two to five years. Leasehold improvements are amortized over the shorter
of the lease term or expected useful lives of the improvements. Depreciation expense totaled
$70.0 million, $39.5 million and $18.6 million for the years ended December 31, 2012, 2011 and 2010,
respectively.
Website and Internal-Use Software Development Costs
The Company capitalizes its costs to develop its website and internal-use software when preliminary
development efforts are successfully completed, management has authorized and committed project
funding, and it is probable that the project will be completed and the software will be used as intended.
Such costs are amortized on a straight-line basis over the estimated useful life of the related asset, which
approximates two to three years. Costs incurred prior to meeting these criteria, together with costs
incurred for training and maintenance, are expensed as incurred.
The Company capitalized website and internal-use software costs of $20.0 million, $10.9 million and
$6.4 million for the years ended December 31, 2012, 2011 and 2010, respectively. The Company’s
capitalized website and internal-use software amortization is included in depreciation and amortization in
the Company’s consolidated statements of operations, and totaled $11.2 million, $5.4 million and
$2.9 million for the years ended December 31, 2012, 2011 and 2010, respectively. The Company had
unamortized capitalized website and internal-use software of $20.7 million and $12.0 million in the
consolidated balance sheets as of December 31, 2012 and 2011, respectively.
Goodwill, Intangible Assets, Long-Lived Assets and Impairment Assessments
Goodwill. Goodwill represents the excess of the purchase price of an acquired business over the fair
value of the underlying net tangible and intangible assets. Goodwill is evaluated for impairment annually
in the third quarter of the Company’s fiscal year, and whenever events or changes in circumstances
indicate the carrying value of goodwill may not be recoverable. Triggering events that may indicate
impairment include, but are not limited to, a significant adverse change in customer demand or business
climate that could affect the value of goodwill or a significant decrease in expected cash flows. Through
December 31, 2012, no impairment of goodwill has been identified.
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