Rosetta Stone 2011 Annual Report Download - page 118

Table of Contents
ROSETTA STONE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
15. INCOME TAXES (Continued)
The Company is subject to taxation in the United States and various states and foreign jurisdictions. The Company's tax years 2010, 2009, 2008 and 2007
are subject to examination by the tax authorities. As of December 31, 2011, the Company is under audit in the United States for the tax year 2008 and Japan
for tax years 2008, 2009 and 2010. While the ultimate results cannot be predicted with certainty, the Company believes that adjustments resulting from
examinations, if any, will not have a material adverse effect on its consolidated financial condition or results of operations, and that the accrued tax liabilities
are adequate for all years. No provision was made in 2011 for United States income taxes on undistributed earnings of the foreign subsidiaries as it is the
Company's intention to utilize those earnings in the foreign operations for an indefinite period of time or to repatriate such earnings only when it is tax
effective to do so.
The Company made income tax payments of $1.7 million, $10.0 million and $6.4 million in 2011, 2010 and 2009, respectively.
16. SEGMENT INFORMATION
Beginning in 2011, the company was managed in two operating segments—Consumer and Institutional. These segments also represent our reportable
segments. Management, specifically the chief operating decision maker , began to measure the performance of our operating segments in the first quarter of
2011 based upon operating segment revenue and operating segment contribution. Operating segment contribution includes segment revenue and expenses
incurred directly by the segment, including material costs, service costs, research and development and selling, marketing, and administrative expenses. We
do not allocate certain expenses, which include the majority of general and administrative expenses, facilities and communication expenses, purchasing
expenses, manufacturing support and logistic expenses, depreciation and amortization, amortization of capitalized software development costs, and stock-
based compensation. These expenses are included in the unallocated expenses section of the table presented below. Revenue from transactions between our
operating segments is not material.
With the exception of goodwill, we do not identify or allocate our assets by operating segment to account for or manage the business. Consequently, we
do not present assets or liabilities by operating segment.
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