Enom 2011 Annual Report Download - page 95

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common shares outstanding.
Foreign Currency Transactions
Foreign currency transaction gains and losses are charged or credited to earnings as incurred. For the years ended December 31, 2009, 2010 and
2011, foreign currency transaction gains and losses that are included in other income (expense) in the accompanying statements of operations were not
material.
Foreign Currency Translation
The financial statements of foreign subsidiaries are translated into U.S. dollars. Where the functional currency of a foreign subsidiary is its local
currency, balance sheet accounts are translated at the current exchange rate and income statement items are translated at the average exchange rate for the
period. Gains and losses resulting from translation are accumulated in accumulated other comprehensive earnings (loss) within stockholders' equity (deficit).
Fair Value of Financial Instruments
Fair value represents the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most
advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The Company measures its
financial assets and liabilities in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to
determine fair value.
• Level 1—valuations for assets and liabilities traded in active exchange markets, or interest in open-end mutual funds that allow a company to
sell its ownership interest back at net asset value on a daily basis. Valuations are obtained from readily available pricing sources for market
transactions involving identical assets, liabilities or funds.
• Level 2—valuations for assets and liabilities traded in less active dealer, or broker markets, such as quoted prices for similar assets or
liabilities or quoted prices in markets that are not active. Level 2 includes U.S. Treasury, U.S. government and agency debt securities, and
certain corporate obligations.
Valuations are usually obtained from third-party pricing services for identical or comparable assets or liabilities.
• Level 3—valuations for assets and liabilities that are derived from other valuation methodologies, such as option pricing models, discounted
cash flow models and similar techniques, and not based on market exchange, dealer, or broker traded transactions. Level 3 valuations
incorporate certain assumptions and projections in determining the fair value assigned to such assets or liabilities.
In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of
unobservable inputs to the extent possible as well as considers counterparty credit risk in its assessment of fair value.
The Company chose not to elect the fair value option for its financial assets and liabilities that had not been previously carried at fair value.
Therefore, material financial assets and liabilities not carried at fair value, such as trade accounts receivable and payables, are reported at their carrying values.
The carrying amounts of the Company’s financial instruments, including cash and cash equivalents, accounts receivable, receivables from domain
name registries, registry deposits, accounts payable, accrued liabilities and customer deposits approximate fair value because of their short maturities. The
Company’s investments in marketable securities are recorded at fair value. Prior to the net exercise of the Series C preferred stock warrants concurrent with
the Company’s initial public offering, the Series C preferred stock warrants were recorded at fair value with changes in fair value recorded in other income
(expense), net. Certain assets, including equity investments, investments held at cost, goodwill and intangible assets are also subject to measurement at fair
value on a nonrecurring basis, if they are deemed to be impaired as the result of an impairment review. For the year ended December 2009, 2010 and 2011, no
impairments were recorded on those assets required to be measured at fair value on a nonrecurring basis.
F-16