NetZero 2011 Annual Report Download - page 126

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)
Foreign Currency Translation —The Company accounts for foreign currency translation in accordance with ASC 830, Foreign Currency
Matters
. The functional currency of each of the Company's international subsidiaries is its respective local currency. The financial statements of
these subsidiaries are translated to U.S. Dollars using period-end rates of exchange for assets and liabilities, and average rates of exchange for
the period for revenues and expenses. Translation gains and losses are recorded in accumulated other comprehensive loss as a component of
stockholders' equity in the consolidated balance sheets.
Income Taxes —The Company applies the provisions of ASC 740, Income Taxes . Under ASC 740, deferred tax assets and liabilities are
determined based on differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax
rates and laws that will be in effect when the differences are expected to reverse. The Company records a valuation allowance to reduce its
deferred tax assets to the amount that is more likely than not to be realized. In evaluating the Company's ability to recover its deferred tax assets,
the Company considers all available positive and negative evidence, including its operating results, ongoing tax planning and forecasts of future
taxable income on a jurisdiction-by-jurisdiction basis. In accordance with ASC 740, the Company recognizes, in its consolidated financial
statements, the impact of the Company's tax positions that are more likely than not to be sustained upon examination based on the technical
merits of the positions. The Company recognizes interest and penalties for uncertain tax positions in income tax expense.
Earnings Per Share —The Company computes earnings per share in accordance with ASC 260, Earnings Per Share . ASC 260 provides
that unvested share-based payment awards that contain non-forfeitable rights to dividends are participating securities and shall be included in the
computation of earnings per share pursuant to the two-class method. The two-class method of computing earnings per share is an earnings
allocation formula that determines earnings per share for common stock and any participating securities according to dividends declared
(whether paid or unpaid) and participation rights in undistributed earnings. Certain of the Company's restricted stock units are considered
participating securities because they contain non-forfeitable rights to dividends irrespective of whether the awards ultimately vest.
Legal Contingencies —The Company is currently involved in certain legal proceedings and investigations. The Company records liabilities
related to pending matters when an unfavorable outcome is deemed probable and management can reasonably estimate the amount or range of
loss. As additional information becomes available, the Company continually assesses the potential liability related to such pending matter.
Operating Leases —The Company leases office space, data centers, vehicles, and certain office equipment under operating lease
agreements with original lease periods of up to ten years. Certain of the lease agreements contain rent holidays and rent escalation provisions.
Rent holidays and rent escalation provisions are considered in determining straight-line rent expense to be recorded over the lease term. The
lease term begins on the date of initial possession of the leased property for purposes of recognizing lease expense on a straight-line basis over
the term of the lease.
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