Enom 2010 Annual Report Download - page 61

Table of Contents
Interest Income
Interest income consists of interest earned on cash balances and short-term investments. We typically invest our available cash balances in money market
funds, short-term United States Treasury obligations and commercial paper.
Other Income (Expense), Net
Other income (expense), net consists primarily of the change in the fair value of our preferred stock warrant liability, transaction gains and losses on
foreign currency-denominated assets and liabilities and changes in the value of certain long term investments. We expect our transaction gains and losses will
vary depending upon movements in underlying currency exchange rates, and could become more significant when we expand internationally. Our preferred
stock warrants were net exercised for common stock upon our initial public offering in January 2011 and thus we will no longer record changes in the value of
the warrant subsequent to that date.
Provision for Income Taxes
Since our inception, we have been subject to income taxes principally in the United States, and certain other countries where we have legal presence,
including the United Kingdom, the Netherlands, Canada, Sweden and beginning in 2011, Ireland. We anticipate that as we expand our operations outside the
United States, we will become subject to taxation based on the foreign statutory rates and our effective tax rate could fluctuate accordingly.
Income taxes are computed using the asset and liability method, under which deferred tax assets and liabilities are determined based on the difference
between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to
affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.
We currently believe that based on the available information, it is more likely than not that our deferred tax assets will not be realized, and accordingly
we have taken a full valuation allowance against all of our United States deferred tax assets. As of December 31, 2010, we had approximately $62.0 million of
federal and $10.0 million of state operating loss carry-forwards available to offset future taxable income which expire in varying amounts beginning in 2020
for federal and 2013 for state purposes if unused. Federal and state laws impose substantial restrictions on the utilization of net operating loss and tax credit
carry-forwards in the event of an "ownership change," as defined in Section 382 of the Internal Revenue Code of 1986, as amended, or the Internal Revenue
Code. Currently, we do not expect the utilization of our net operating loss and tax credit carry-forwards in the near term to be materially affected as no
significant limitations are expected to be placed on these carry-forwards as a result of our previous ownership changes. If an ownership change is deemed to
have occurred as a result of our initial public offering, potential near term utilization of these assets could be reduced.
Critical Accounting Policies and Estimates
Our consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States. The preparation of
these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses
and related disclosures. We evaluate our estimates and assumptions on an ongoing basis. Our estimates are based on historical experience and various other
assumptions that we believe to be reasonable under the circumstances. Our actual results could differ from these estimates.
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