Plantronics 2015 Annual Report Download - page 62

Significant judgment is required in evaluating the Company's uncertain tax positions and determining its provision for income
taxes. The Company establishes reserves for tax-related uncertainties based on estimates of whether, and the extent to which,
additional taxes will be due. These reserves are established when the Company believes that certain positions might be challenged
despite its belief that its tax return positions are in accordance with applicable tax laws. The Company adjusts these reserves in
light of changing facts and circumstances, such as the closing of a tax audit, new tax legislation, or the change of an estimate. To
the extent that the final tax outcome of these matters is different than the amounts recorded, such differences will affect the provision
for income taxes in the period in which such determination is made. The provision for income taxes includes the effect of reserve
provisions and changes to reserves that are considered appropriate, as well as the related net interest and penalties. The Company
follows the tax law ordering to determine when excess tax benefits have been realized.
The Company is subject to income taxes in the U.S. and foreign jurisdictions. At any one time, multiple tax years are subject to
audit by various tax authorities.
Earnings Per Share
Basic earnings per share is computed by dividing the net income for the period by the weighted average number of common shares
outstanding during the period, less common stock subject to repurchase. Diluted earnings per share is computed by dividing the
net income for the period by the weighted average number of shares of common stock and potentially dilutive common stock
outstanding during the period. Potentially dilutive common shares include shares issuable upon the exercise of outstanding stock
options, the vesting of awards of restricted stock, and the estimated shares to be purchased under the Company’s employee stock
purchase plan ("ESPP"), which are reflected in diluted earnings per share by application of the treasury stock method. Under the
treasury stock method, the amount that the employee must pay for exercising stock options, the amount of stock-based compensation
cost for future services that the Company has not yet recognized, and the amount of tax benefit that would be recorded in additional
paid-in capital upon exercise are assumed to be used to repurchase shares.
Comprehensive Income
Comprehensive income consists of two components, net income and other comprehensive income. Other comprehensive income
refers to income, expenses, gains, and losses that under U.S. GAAP are recorded as an element of stockholders’ equity but are
excluded from net income. Accumulated other comprehensive income, as presented in the accompanying consolidated balance
sheets, consists of foreign currency translation adjustments, unrealized gains and losses on derivatives designated as cash flow
hedges, net of tax, and unrealized gains and losses on marketable securities classified as available-for-sale, net of tax.
Foreign Operations and Currency Translation
The functional currency of the Company’s foreign sales and marketing offices, except as noted in the following paragraph, is the
local currency of the respective operations. For these foreign operations, the Company translates assets and liabilities into U.S.
dollars using the period-end exchange rates in effect as of the balance sheet date and translates revenues and expenses using the
average monthly exchange rates. The resulting cumulative translation adjustments are included in accumulated other
comprehensive income, a separate component of stockholders' equity on the accompanying consolidated balance sheets.
The functional currency of the Company’s European finance, sales and logistics headquarters in the Netherlands, sales office and
warehouse in Japan, a manufacturing facility in Tijuana, Mexico, and logistic and research and development facilities in China,
is the U.S. Dollar. For these foreign operations, assets and liabilities denominated in foreign currencies are re-measured at the
period-end or historical rates, as appropriate. Revenues and expenses are re-measured at average monthly rates, which the Company
believes to be a fair approximation of actual rates. Currency transaction gains and losses are recognized in current operations.
Stock-Based Compensation Expense
The Company applies the provisions of the Compensation – Stock Compensation Topic of the FASB ASC, which requires the
measurement and recognition of compensation expense for all share-based payment awards made to employees and non-employee
directors based on estimated fair values. The Company recognizes the grant-date fair value of stock-based compensation as
compensation expense using the straight-line attribution approach over the service period for which the stock-based compensation
is expected to vest.
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