Vistaprint 2013 Annual Report Download - page 64

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realize our deferred tax assets based upon the weight of available evidence both positive and negative. To the
extent we believe that it is more likely than not that that some portion or all of the deferred tax assets will not be
realized, we establish a valuation allowance. In the event that actual results differ from our estimates or we adjust
our estimates in the future, we may need to increase or decrease income tax expense, which could have a material
impact on our financial position and results of operations.
We recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax
position will be sustained upon examination by the taxing authorities, based on the technical merits of the tax
position. The tax benefits recognized in our financial statements from such positions are measured on the largest
benefit that has a greater than 50% likelihood of being realized upon ultimate resolution. The unrecognized tax
benefits will reduce our effective tax rate if recognized. Interest and, if applicable, penalties related to unrecognized
tax benefits are recorded in the provision for income taxes.
Foreign Currency Translation
Our non-U.S. dollar functional currency subsidiaries translate their assets and liabilities denominated in
their functional currency to U.S. dollars at current rates of exchange in effect at the balance sheet date, and
revenues and expenses are translated at average rates prevailing throughout the period. The resulting gains and
losses from translation are included as a component of accumulated other comprehensive (loss) income.
Transaction gains and losses and remeasurement of assets and liabilities denominated in currencies other than an
entity’s functional currency are included in other income (expense), net in our statement of operations.
Net Income Per Share
Basic net income per share is computed by dividing net income by the weighted-average number of
ordinary shares outstanding for the respective period. Diluted net income per share gives effect to all potentially
dilutive securities, including share options, restricted share units (“RSUs”) and restricted share awards ("RSAs"), if
the effect of the securities is dilutive using the treasury stock method. Awards with performance or market
conditions are included using the treasury stock method only if the conditions would have been met as of the end of
the reporting period and their effect is dilutive.
The following table sets forth the reconciliation of the weighted-average number of ordinary shares:
Year Ended June 30,
2013 2012 2011
Weighted average shares outstanding, basic . . . . . . . . . . . . . 33,209,172 37,813,504 43,431,326
Weighted average shares issuable upon exercise/vesting of
outstanding share options/RSUs/RSAs. . . . . . . . . . . . . . . . . . 1,262,832 1,139,675 1,519,873
Shares used in computing diluted net income per share. . . . . 34,472,004 38,953,179 44,951,199
Weighted average anti-dilutive shares excluded from diluted
net income per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,740,542 1,495,858 640,214
Compensation Expense
Share-Based Compensation
Compensation expense for all share-based awards expected to vest is measured at fair value on the date
of grant and recognized over the requisite service period. The fair value of share options is determined using the
Black-Scholes valuation model, or lattice model for share options with a market condition, and the fair value of
RSUs and RSAs is determined based on the number of shares granted and the quoted price of our ordinary shares.
Such value is recognized ratably as expense over the requisite service period, or on an accelerated method for
awards with a performance or market condition, net of estimated forfeitures. The estimation of share awards that
will ultimately vest requires judgment, and to the extent actual results or updated estimates differ from our current
estimates, such amounts will be recorded as a cumulative adjustment in the period estimates are revised. We
consider many factors when estimating expected forfeitures, including types of awards, employee class, and
historical experience. For awards with a performance condition vesting feature, compensation cost is recorded if it
is probable that the performance condition will be achieved.
Form 10-K