NetZero 2011 Annual Report Download - page 125

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Table of Contents
UNITED ONLINE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
1. DESCRIPTION OF BUSINESS, BASIS OF PRESENTATION, ACCOUNTING POLICIES, AND RECENT ACCOUNTING
PRONOUNCEMENTS (Continued)
associated with operating our corporate network systems. In addition, general and administrative expenses include, among other costs,
professional fees for legal, accounting and financial services; insurance; occupancy and other overhead-related costs; office relocation costs;
non-income taxes; gains and losses on sales of assets; and reserves or expenses incurred as a result of settlements, judgments, fines, penalties,
assessments, or other resolutions related to litigation, arbitration, investigations, disputes, or similar matters. General and administrative
expenses also include expenses resulting from actual or potential transactions such as business combinations, mergers, acquisitions, and
financing transactions, including expenses for advisors and representatives such as investment bankers, consultants, attorneys, and
accounting firms.
Restructuring and Other Exit Costs —Restructuring and other exit costs consist of costs associated with the realignment and reorganization
of the Company's operations and other employee termination events. Restructuring and other exit costs include employee termination costs,
facility closure and relocation costs, and contract termination costs. The timing of associated cash payments is dependent upon the type of exit
cost and can extend over a 12-month period. The Company records restructuring and other exit costs liabilities in accrued liabilities in the
consolidated balance sheets.
Stock-Based Compensation —The Company follows the provisions of ASC 718, Compensation—Stock Compensation , which requires the
measurement and recognition of compensation expense for all share-
based payment awards made to employees and directors including restricted
stock units, stock awards, stock options, and employee stock purchases. ASC 718 requires companies to estimate the fair value of share-based
payment awards on the grant date using an option-pricing model. The Company values its restricted stock units based on the grant-date closing
price of the Company's common stock. The Company uses the Black-Scholes option-pricing model for valuing stock options. The Company's
assumptions about stock price volatility are based on historical volatility for periods approximating the expected life of options granted. The
expected term was estimated using the simplified method because the Company does not have adequate historical data to estimate expected term.
The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant. The value of the portion of the award that is
ultimately expected to vest is recognized as an expense over the requisite service periods on a straight-line basis in the Company's consolidated
statements of operations. ASC 718 also requires forfeitures to be estimated at the time of grant in order to calculate the amount of share-based
payment awards ultimately expected to vest. The Company uses the "with and without" approach in determining the order in which tax attributes
are utilized. As a result, the Company only recognizes a tax benefit from share-based payment awards in additional paid-in capital in the
consolidated balance sheets if an incremental tax benefit is realized after all other tax attributes currently available to the Company have been
utilized. In addition, the Company accounts for the indirect effects of share-based payment awards on other tax attributes in the consolidated
statements of operations.
Comprehensive Income —The Company follows the provisions of ASC 220, Comprehensive Income , which establishes standards for
reporting comprehensive income and its components in financial statements. Comprehensive income, as defined, includes all changes in equity
during a period from non-owner sources. For the Company, comprehensive income primarily consists of its reported net income, changes in
unrealized gains or losses on derivatives, net of tax, and foreign currency translation.
F-17