Carbonite 2011 Annual Report Download - page 63

Table of Contents
Carbonite, Inc.
Income Taxes
The Company provides for income taxes under the liability method. Deferred tax assets and liabilities are determined based on differences
between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates in effect when the differences are
expected to reverse. Deferred tax assets are reduced by a valuation allowance to reflect the uncertainty associated with their ultimate realization.
The Company accounts for uncertain tax positions recognized in the consolidated financial statements by prescribing a more-likely-than-not
threshold for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return.
Comprehensive Income (Loss)
All components of comprehensive income (loss) are required to be disclosed in the consolidated financial statements. Comprehensive income
(loss) is defined as the change in equity of a business enterprise during a period from transactions, and other events and circumstances from nonowner
sources. Accumulated other comprehensive income consists of foreign currency translation adjustments and unrealized gains or losses on available-for-
sale investments for all periods.
Segment Information
Operating segments are defined as components of an enterprise engaging in business activities for which discrete financial information is available
and regularly reviewed by the chief operating decision maker in deciding how to allocate resources and in assessing performance. The Company views
its operations and manages its business in one operating segment. The Company does not disclose geographic information for revenue and long-lived
assets as revenue and long-lived assets located outside the United States do not exceed 10% of total revenue and total assets.
Accounting for Stock-Based Compensation
Stock-based compensation is recognized as an expense in the financial statements based on the grant date fair value of the stock awards granted.
For awards that vest based on service conditions, the Company uses the straight-line method to allocate compensation expense to reporting periods over
the requisite service period. The grant date fair value of options granted is calculated using the Black-Scholes option-pricing model, which requires the
use of subjective assumptions including volatility, expected term and the fair value of the underlying common stock, among others.
Recently Issued and Adopted Accounting Standards
In June 2011, the FASB issued new accounting guidance on the presentation of comprehensive income to provide companies with two options for
presenting comprehensive income. Companies can present the total of comprehensive income, the components of net income, and the components of
other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. This
guidance eliminates the option to present the components of other comprehensive income as part of the statement of changes in stockholders’ equity.
This guidance was effective for the Company on January 1, 2012. As the new guidance relates only to how comprehensive income is disclosed and does
not change the items that must be reported as comprehensive income, the Company does not believe that the adoption of this standard will have a
material impact on its financial position or results of operations.
In September 2011, the FASB issued ASU No. 2011-08, Testing Goodwill for Impairment (the revised standard) . The revised standard is
intended to reduce the cost and complexity of the annual goodwill impairment test by providing entities an option to perform a “qualitative” assessment
to determine whether further impairment testing is necessary. The revised standard was effective for the Company on January 1, 2012. The
59