Enom 2012 Annual Report Download - page 100

F-17
dilutive common shares comprising of stock options, RSPRs, RSUs, stock from the employee stock purchase plan, warrants
and convertible preferred stock are considered antidilutive for those periods.
RSPRs and RSUs and other restricted awards are considered outstanding common shares and included in the
computation of basic earnings per share as of the date that all necessary conditions of vesting are satisfied. RSPRs and RSUs
are excluded from the dilutive earnings per share calculation when their impact is antidilutive. Prior to satisfaction of all
conditions of vesting, unvested RSPRs are considered contingently issuable shares and are excluded from weighted average
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, 2010, 2011 and 2012, 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 within stockholders' equity.
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