Salesforce.com 2016 Annual Report Download - page 94

benefit recognized is measured as the largest amount of benefit which is greater than 50 percent likely to be
realized upon settlement with the taxing authority. The Company recognizes interest accrued and penalties
related to unrecognized tax benefits in the income tax provision.
Valuation allowances are established when necessary to reduce deferred tax assets to the amounts that are more
likely than not expected to be realized based on the weighting of positive and negative evidence. Future realization
of deferred tax assets ultimately depends on the existence of sufficient taxable income of the appropriate character
(for example, ordinary income or capital gain) within the carryback or carryforward periods available under the
applicable tax law. The Company regularly reviews the deferred tax assets for recoverability based on historical
taxable income, projected future taxable income, the expected timing of the reversals of existing temporary
differences and tax planning strategies. The Company’s judgments regarding future profitability may change due to
many factors, including future market conditions and the ability to successfully execute its business plans and/or tax
planning strategies. Should there be a change in the ability to recover deferred tax assets, the tax provision would
increase or decrease in the period in which the assessment is changed.
Foreign Currency Translation
The functional currency of the Company’s major foreign subsidiaries is generally the local currency.
Adjustments resulting from translating foreign functional currency financial statements into U.S. dollars are
recorded as a separate component on the consolidated statements of comprehensive loss. Foreign currency
transaction gains and losses are included in net loss for the period. All assets and liabilities denominated in a
foreign currency are translated into U.S. dollars at the exchange rate on the balance sheet date. Revenues and
expenses are translated at the average exchange rate during the period. Equity transactions are translated using
historical exchange rates.
Warranties and Indemnification
The Company’s enterprise cloud computing services are typically warranted to perform in a manner
consistent with general industry standards that are reasonably applicable and materially in accordance with the
Company’s online help documentation under normal use and circumstances.
The Company’s arrangements generally include certain provisions for indemnifying customers against
liabilities if its products or services infringe a third party’s intellectual property rights. To date, the Company has
not incurred any material costs as a result of such obligations and has not accrued any liabilities related to such
obligations in the accompanying consolidated financial statements.
The Company has also agreed to indemnify its directors and executive officers for costs associated with any
fees, expenses, judgments, fines and settlement amounts incurred by any of these persons in any action or
proceeding to which any of those persons is, or is threatened to be, made a party by reason of the person’s service
as a director or officer, including any action by the Company, arising out of that person’s services as the
Company’s director or officer or that person’s services provided to any other company or enterprise at the
Company’s request. The Company maintains director and officer insurance coverage that would generally enable
the Company to recover a portion of any future amounts paid. The Company may also be subject to
indemnification obligations by law with respect to the actions of its employees under certain circumstances and
in certain jurisdictions.
New Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update
No. 2014-09, “Revenue from Contracts with Customers (Topic 606)” (“ASU 2014-09”) which amended the existing
FASB Accounting Standards Codification. This standard establishes a principle for recognizing revenue upon the
transfer of promised goods or services to customers, in an amount that reflects the expected consideration received
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