ServiceMagic 2012 Annual Report Download - page 63

IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which
those temporary differences are expected to be recovered or settled. A valuation allowance is provided on deferred tax assets if it is determined
that it is more likely than not that the deferred tax asset will not be realized. The Company records interest, net of any applicable related income
tax benefit, on potential income tax contingencies as a component of income tax expense.
The Company recognizes liabilities for uncertain tax positions based on a two-step process. The first step is to evaluate the tax position for
recognition by determining if the weight of available evidence indicates it is more likely than not that the position will be sustained on audit,
including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount which is
more than 50% likely of being realized upon ultimate settlement.
Earnings Per Share
Basic earnings per share ("Basic EPS") is computed by dividing net earnings attributable to IAC shareholders by the weighted average
number of common shares outstanding during the period. Diluted earnings per share ("Diluted EPS") reflects the potential dilution that could
occur if stock options and other commitments to issue common stock were exercised or equity awards vested resulting in the issuance of
common stock that could share in the earnings of the Company.
Foreign Currency Translation and Transaction Gains and Losses
The financial position and operating results of substantially all foreign operations are consolidated using the local currency as the
functional currency. Local currency assets and liabilities are translated at the rates of exchange as of the balance sheet date, and local currency
revenue and expenses are translated at average rates of exchange during the period. Translation gains and losses are included in accumulated
other comprehensive income as a component of shareholders' equity. Transaction gains and losses resulting from assets and liabilities
denominated in a currency other than the functional currency are included in the consolidated statement of operations as a component of other
(expense) income, net.
Translation gains and losses relating to foreign entities that are liquidated or substantially liquidated are reclassified out of accumulated
other comprehensive income into earnings. Such gains totaled $9.2 million during the year ended December 31, 2011
, and are included in "Loss
from discontinued operations, net of tax" in the accompanying consolidated statement of operations.
Stock-Based Compensation
Stock-based compensation is measured at the grant date based on the fair value of the award and is generally expensed over the requisite
service period. See Note 14 for a further description of the Company's stock-based compensation plans.
Redeemable Noncontrolling Interests
In connection with the acquisition of certain subsidiaries, management of these businesses has retained an ownership interest. The
Company is party to fair value put and call arrangements with respect to these interests. These put and call arrangements allow management of
these businesses to require the Company to purchase their interests or allow the Company to acquire such interests at fair value, respectively.
These put and call arrangements become exercisable by the Company and the counter-party at various dates over the next four years. There are
no put and call arrangements that became exercisable during 2012 and 2010. During 2011, one of these arrangements became exercisable. These
put arrangements are exercisable by the counter-party outside the control of the Company. Accordingly, to the extent that the fair value of these
interests exceeds the value determined by normal noncontrolling interest accounting, the value of such interests is adjusted to fair value with a
corresponding adjustment to additional paid-in capital. During the years ended December 31, 2012 , 2011 and 2010 , the Company recorded
adjustments of $4.3 million , $4.3 million and $(2.1) million , respectively, to increase (reduce) these interests to fair value.
Noncontrolling interests in the consolidated subsidiaries of the Company should ordinarily be reported on the consolidated balance sheet
within shareholders' equity, separately from the Company's equity. However, securities that are redeemable at the option of the holder and not
solely within the control of the issuer, must be classified outside of shareholders' equity. Accordingly, if redemption of the noncontrolling
interests is outside the control of the Company, the interests are included outside of shareholders' equity in the accompanying consolidated
balance sheet.
Redeemable noncontrolling interests at December 31, 2012 and 2011 primarily relate to Meetic and certain operations included in the
Media and Other segments. Redeemable noncontrolling interests at December 31, 2010 primarily relate to the international operations of Match