Etsy 2015 Annual Report Download - page 87

Download and view the complete annual report

Please find page 87 of the 2015 Etsy annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 126

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126


Etsy, Inc.
Notes to Consolidated Financial Statements
losses including intercompany transactions denominated in a currency other than the functional currency of the entity involved are included in foreign
exchange loss within other (expense) income in the statement of operations.
Excess Tax Benefits from Exercise of Stock Options
The Company uses the “with and without” approach in determining the order in which tax attributes are utilized. As a result, the Company recognizes a tax
benefit from stock-based awards in additional paid-in capital only if an incremental tax benefit is realized after all other tax attributes currently available to
the Company have been utilized. When tax deductions from stock-based awards are less than the cumulative book compensation expense, the tax effect of
the resulting difference (“shortfall”) is charged first to additional paid-in capital, to the extent of the Company’s pool of windfall tax benefits, with any
remainder recognized in income tax expense. The Company determined that it had a sufficient windfall pool available through December 31, 2015 to absorb
any shortfalls.
Recent Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board, or FASB, issued an accounting standards update that replaces existing revenue recognition
guidance. The new guidance is effective for the annual and interim periods beginning after December 15, 2017. Among other things, the updated guidance
requires companies to recognize revenue in a way that depicts the transfer of promised goods or services to customers in an amount that reflects the
consideration to which the entity expects to be entitled in exchange for those goods or services. The Company is currently evaluating the effect the guidance
will have on its consolidated financial statements.
In August 2014, the FASB issued an accounting standard update under which management will be required to assess an entity’s ability to continue as a going
concern and provide related disclosures in certain circumstances. The new guidance is effective for annual and interim periods beginning after December 15,
2016. The adoption of this guidance is not expected to have an impact on the Company’s consolidated financial statements or disclosures.
In April 2015, the FASB issued an accounting standard under which customers will apply the same criteria as vendors to determine whether a cloud
computing arrangement contains a software license or is solely a service contract. The new standard is effective for annual and interim periods beginning after
December 15, 2015. The Company has evaluated the effect this guidance will have on the consolidated financial statements and do not believe the impact to
be material.
In August 2015, the FASB issued an accounting standard update to address the presentation and subsequent measurement of debt issuance costs related to
line-of-credit arrangements. The guidance affirms the Company's treatment of such costs, which is to defer and present the debt issuance costs as an asset and
subsequently amortize the costs over the term of the line-of-credit arrangement. The new standard is effective for annual and interim periods beginning after
December 15, 2015. The adoption of this guidance is not expected to have an impact on the Company’s consolidated financial statements or disclosures.
In September 2015, the FASB issued an accounting standard update that eliminates the requirement that an acquirer in a business combination account for
measurement-period adjustments retrospectively. Instead, an acquirer will recognize a measurement-period adjustment during the period in which it
determines the amount of the adjustment. The new guidance is effective for annual and interim periods beginning after December 15, 2015. The adoption of
this guidance is not expected to have an impact on the Company’s consolidated financial statements or disclosures.
In November 2015, the FASB issued an accounting standard update that requires a reporting entity to classify deferred tax assets and liabilities as noncurrent
in a classified statement of financial position. Current guidance requiring the offsetting of deferred tax assets and liabilities of a tax-paying component of an
entity and presentation as a single noncurrent amount is not affected. The new guidance is effective for annual and interim periods beginning after December
15, 2015, and early adoption is permitted for financial statements as of the beginning of an interim or annual reporting period. The Company made the
decision to adopt this guidance early and have applied it retroactively in the current fiscal period. The adoption of this guidance has impacted the current
and noncurrent deferred tax asset and liability balances for the current and prior fiscal years on the consolidated balance sheets. As a result of this retroactive
application, the Company reclassified $2.9 million previously included in deferred tax assets—current to offset deferred tax liabilities on the consolidated
balance sheets for 2014.
82