LinkedIn 2014 Annual Report Download - page 92

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, 2014 and 2013 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 of transaction gains or losses related
to the hedged items in the consolidated statements of operations.
Net realized and unrealized gains and losses were not material for the years ended December 31,
2014, 2013, and 2012. As of December 31, 2014 and 2013, the Company had outstanding foreign
currency derivative contracts with a total notional amount of $190.1 million and $94.8 million,
respectively.
Property and Equipment
Property and equipment are stated at cost, less accumulated depreciation and amortization.
Depreciation 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 depreciated over the shorter of the
lease term or expected useful lives of the improvements. Depreciation expense totaled $202.3 million,
$118.1 million and $70.0 million for the years ended December 31, 2014, 2013 and 2012, respectively.
Website and Internal-Use Software Development Costs
The Company capitalizes certain costs to develop its website, mobile applications and internal-use
software when preliminary development efforts are successfully completed, management has
committed project resourcing, 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 is generally two 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 $55.7 million, $39.3 million
and $20.0 million for the years ended December 31, 2014, 2013 and 2012, respectively. The
Company’s capitalized website and internal-use software depreciation is included in depreciation and
amortization in the Company’s consolidated statements of operations, and totaled $40.7 million,
$15.6 million and $11.2 million for the years ended December 31, 2014, 2013 and 2012, respectively.
The Company had unamortized capitalized website and internal-use software of $59.4 million and
$44.3 million in the consolidated balance sheets as of December 31, 2014 and 2013, 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 member
engagement or business climate that could affect the value of goodwill or a significant decrease in
expected cash flows. Since inception through December 31, 2014, the Company did not have any
goodwill impairment.
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