Activision 2011 Annual Report Download - page 59

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Foreign Currency Translation
All assets and liabilities of our foreign subsidiaries are translated into U.S. dollars at the exchange rate in effect at the
balance sheet date, and revenue and expenses are translated at average exchange rates during the period. The resulting translation
adjustments are reflected as a component of “Accumulated other comprehensive income (loss)” in shareholders’ equity.
Earnings (Loss) Per Common Share
“Basic earnings (loss) per common share” is computed by dividing income (loss) available to common shareholders
by the weighted average number of common shares outstanding for the periods presented. “Diluted earnings per share” is
computed by dividing income (loss) available to common shareholders by the weighted average number of common shares
outstanding, increased by the weighted average number of common stock equivalents. Common stock equivalents are calculated
using the treasury stock method and represent incremental shares issuable upon exercise of our outstanding options. However,
potential common shares are not included in the denominator of the diluted earnings (loss) per share calculation when inclusion
of such shares would be anti-dilutive, such as in a period in which a net loss is recorded.
When we determine whether instruments granted in stock-based payment transactions are participating securities,
unvested stock-based awards which include the right to receive non-forfeitable dividends or dividend equivalents are considered
to participate with common stock in undistributed earnings. With participating securities, we are required to calculate basic and
diluted earnings per common share amounts under the two-class method. The two-class method excludes from earnings per
common share calculations any dividends paid or owed to participating securities and any undistributed earnings considered to
be attributable to participating securities.
Stock-Based Compensation
We account for stock-based compensation in accordance with ASC Topic 718-10, Compensation-Stock
Compensation, and ASC Subtopic 505-50, Equity-Based Payments to Non-Employees (“ASC stock-based compensation
guidance”). Stock-based compensation expense recognized during the requisite services period (that is, the period for which the
employee is being compensated) and is based on the value of stock-based payment awards after reduction for estimated
forfeitures. Forfeitures are estimated at the time of grant and are revised, if necessary, in subsequent periods if actual forfeitures
differ from those estimates. Stock-based compensation expense recognized in the consolidated statement of operations for the
years ended December 31, 2011, 2010, and 2009 included both compensation expense for stock-based payment awards granted
by Activision, Inc. prior to, but not yet vested as of July 9, 2008, based on the revalued fair value estimated at July 9, 2008, and
compensation expense for the stock-based payment awards granted by us subsequent to July 9, 2008.
We estimate the value of stock-based payment awards on the measurement date using a binomial-lattice model. Our
determination of fair value of stock-based payment awards on the date of grant using an option-pricing model is affected by our
stock price as well as assumptions regarding a number of highly complex and subjective variables. These variables include, but
are not limited to, our expected stock price volatility over the term of the awards, and actual and projected employee stock option
exercise behaviors.
We generally determine the fair value of restricted stock rights (including restricted stock units, restricted stock
awards, and performance shares) based on the closing market price of the Company’s common stock on the date of grant.
See Note 18 of the Notes to Consolidated Financial Statements.
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