Urban Outfitters 2009 Annual Report Download - page 61

URBAN OUTFITTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Net Income Per Common Share
Basic net income per common share is computed by dividing net income available to common
shareholders by the weighted average number of common shares outstanding. Diluted net income per
common share is computed by dividing net income available to common shareholders by the weighted
average number of common shares outstanding, after giving effect to the potential dilution from the
exercise of securities, such as stock options and non-vested shares, into shares of common stock as if
those securities were exercised (see Note 10).
Accounting for Stock-Based Compensation
Effective February 1, 2006, the Company adopted SFAS No. 123R, “Share Based Payment”,
(“SFAS 123R”), using the modified prospective approach. Under the modified prospective approach,
the amount of compensation cost recognized includes: (i) compensation cost for all share-based
payments granted before but not yet vested as of January 31, 2006, based on the grant date fair value
estimated in accordance with the provisions of SFAS No. 123, and (ii) compensation cost for all share-
based payments granted or modified subsequent to January 31, 2006, based on the estimated fair value
at the date of grant or subsequent modification date in accordance with the provisions of SFAS 123R.
SFAS 123R also required the Company to change the classification in our consolidated statement
of cash flows, of any income tax benefits realized upon the exercise of stock options or issuance of
restricted share unit awards in excess of that which is associated with the expense recognized for
financial reporting purposes. These amounts are presented as financing inflows in our consolidated
statement of cash flows.
Prior to February 1, 2006 the Company accounted for our share-based compensation plans in
accordance with the provisions of Accounting Principles Board Opinion No. 25, “Accounting for
Stock Issued to Employees”, as permitted by SFAS 123, and accordingly did not recognize
compensation expense for stock options with an exercise price equal to or greater than the market price
of the underlying stock at the date of the grant (see Note 9).
Accumulated Other Comprehensive Income
Comprehensive income is comprised of two subsets—net income and other comprehensive
income. Amounts in accumulated other comprehensive income relate to foreign currency translation
adjustments and unrealized gains or losses on marketable securities. The foreign currency translation
adjustments are not adjusted for income taxes because these adjustments relate to indefinite
investments in non-U.S. subsidiaries. As of January 31, 2009, accumulated other comprehensive
income consisted of a foreign currency translation loss of $14,496. As of January 31, 2008,
accumulated other comprehensive income consisted of a foreign currency translation gain of $5,370.
As of January 31, 2009, other comprehensive income included an unrealized loss, net of tax, on
marketable securities of $3,251 and as of January 31, 2008, an unrealized gain of $1,865, net of tax, on
marketable securities. Gross realized gains are included in other income and were not material to the
Company’s financial statements for all three years presented.
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