Yahoo 1998 Annual Report Download - page 45

Stock-Based Compensation. The Company accounts for stock-based employee com-
pensation arrangements in accordance with the provisions of Accounting Principles
Board Opinion (“APB”) No. 25, “Accounting for Stock Issued to Employees,” and
complies with the disclosure provisions of Statement of Financial Accounting
Standards (“SFAS”) No. 123, “Accounting for Stock-Based Compensation.” Under APB
25, compensation cost is recognized over the vesting period based on the differ-
ence, if any, on the date of grant between the fair value of the Company’s stock and
the amount an employee must pay to acquire the stock.
Foreign Currency and International Operations. The functional currency of the
Company’s international subsidiaries is the local currency. The financial state-
ments of these subsidiaries are translated to United States dollars using year-end
rates of exchange for assets and liabilities, and average rates of exchange for
the year for revenues, costs, and expenses. Translation gains (losses), which are
deferred and accumulated as a component of shareholders’ equity, were $288,000,
($380,000), and ($63,000) for 1998, 1997, and 1996, respectively. Net gains and
losses resulting from foreign exchange transactions are included in the consoli-
dated statements of operations and were not significant during the periods presented.
International revenues have accounted for less than 10% of net revenues in the
years ended December 31, 1998, 1997, and 1996. International assets were not
significant at December 31, 1998, 1997, or 1996.
Basic and Diluted Net Income (Loss) per Share. Basic net income (loss) per share is
computed using the weighted average number of common shares outstanding dur-
ing the period. Diluted net income (loss) per share is computed using the weighted
average number of common and common equivalent shares outstanding during
the period. Common equivalent shares consist of the incremental common shares
issuable upon conversion of convertible preferred stock (using the if-converted
method) and shares issuable upon the exercise of stock options and warrants (using
the treasury stock method). For 1998, common equivalent shares primarily related
to shares issuable upon the exercise of stock options and approximated 40.0
million shares. Common equivalent shares in 1997 and 1996 were excluded from
the computation as their effect was anti-dilutive.
Use of Estimates. The preparation of financial statements in conformity with gener-
ally accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, disclosure
of contingent assets and liabilities at the date of the financial statements, and the
reported amounts of revenues and expenses during the reported period. Actual
results could differ from those estimates.
Comprehensive Income. In June 1997, the Financial Accounting Standards Board
(“FASB”) issued SFAS 130, “Reporting Comprehensive Income,” which was adopted
by the Company in the first quarter of fiscal 1998. SFAS 130 establishes standards
for reporting comprehensive income and its components in a financial statement.
Comprehensive income as defined includes all changes in equity (net assets) during
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