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PART II
ITEM8.NotestoConsolidatedFinancialStatements
Long-Lived Assets Including Goodwill and Other Acquired Intangible Assets
Wereviewpropertyandequipment,long-termprepaymentsandintangibleassets,excludinggoodwill,forimpairmentwhenever
eventsorchangesincircumstancesindicatethecarryingamountofanassetmaynotberecoverable.Wemeasurerecoverability
oftheseassetsbycomparingthecarryingamountstothefutureundiscountedcashowstheassetsareexpectedtogenerate.If
propertyandequipmentandintangibleassetsareconsideredtobeimpaired,theimpairmenttoberecognizedequalstheamount
bywhichthecarryingvalueoftheassetexceedsitsfairmarketvalue.Wehavemadenomaterialadjustmentstoourlong-lived
assetsinanyoftheyearspresented.Inaddition,wetestourgoodwillforimpairmentatleastannuallyormorefrequentlyifevents
orchangesincircumstancesindicatethatthisassetmaybeimpaired.Nogoodwillimpairmenthasbeenidentiedinanyofthe
yearspresented.
Intangibleassetswithdenitelivesareamortizedovertheirestimatedusefullives.Weamortizeouracquiredintangibleassetson
astraight-linebasiswithdenitelivesoverperiodsrangingfromonetotwelveyears.
Income Taxes
Werecognizeincometaxesundertheliabilitymethod.Werecognizedeferredincometaxesfordierencesbetweenthenancial
reportingandtaxbasesofassetsandliabilitiesatenactedstatutorytaxratesineectfortheyearsinwhichdierencesare
expectedtoreverse.Werecognizetheeectondeferredtaxesofachangeintaxratesinincomeintheperiodthatincludesthe
enactmentdate.
Foreign Currency
Generally,thefunctionalcurrencyofourinternationalsubsidiariesisthelocalcurrency.Wetranslatethenancialstatements
ofthesesubsidiariestoU.S.dollarsusingmonth-endratesofexchangeforassetsandliabilities,andaverageratesofexchange
forrevenues,costs,andexpenses.Werecordtranslationgainsandlossesinaccumulatedothercomprehensiveincomeasa
componentofstockholders’equity.Werecorded$107millionofnettranslationlossesin2011,$75millionofnettranslation
gainsin2012,and$89millionofnettranslationgainsin2013.Werecordnetgainsandlossesresultingfromforeignexchange
transactionsasacomponentofforeigncurrencyexchangelossesininterestandotherincome,net.Thesegainsandlossesare
netofthoserecognizedonforeignexchangecontracts.Werecorded$38millionofnetlossesin2011,$78millionofnetlosses
in2012,and$120millionofnetlossesin2013.
Advertising and Promotional Expenses
Weexpenseadvertisingandpromotionalcostsintheperiodinwhichtheyareincurred.FortheyearsendedDecember31,2011,
2012and2013,advertisingandpromotionalexpensestotaledapproximately$1,544million,$2,332million,and$2,848million.
Net Income Per Share of Class A and Class B Common Stock
WecomputenetincomepershareofClassAandClassBcommonstockusingthetwo-classmethod.Basicnetincomepershare
iscomputedusingtheweighted-averagenumberofcommonsharesoutstandingduringtheperiod.Dilutednetincomepershare
iscomputedusingtheweighted-averagenumberofcommonsharesandtheeectofpotentiallydilutivesecuritiesoutstanding
duringtheperiod.Potentiallydilutivesecuritiesconsistofstockoptions,warrantsissuedundertheTSOprogram,andrestricted
stockunits.TheTSOprogramwasdiscontinuedasofNovember29,2013.Thedilutiveeectofoutstandingstockoptions,
warrants,andrestrictedstockunitsisreectedindilutedearningspersharebyapplicationofthetreasurystockmethod.The
computationofthedilutednetincomepershareofClassAcommonstockassumestheconversionofClassBcommonstock,
whilethedilutednetincomepershareofClassBcommonstockdoesnotassumetheconversionofthoseshares.
Therights,includingtheliquidationanddividendrights,oftheholdersofourClassAandClassBcommonstockareidentical,
exceptwithrespecttovoting.Further,thereareanumberofsafeguardsbuiltintoourcerticateofincorporation,aswellas
Delawarelaw,whichprecludeourboardofdirectorsfromdeclaringorpayingunequalpersharedividendsonourClassAand
ClassBcommonstock.Specically,Delawarelawprovidesthatamendmentstoourcerticateofincorporationwhichwould
havetheeectofadverselyalteringtherights,powers,orpreferencesofagivenclassofstock(inthiscasetherightofourClass
AcommonstocktoreceiveanequaldividendtoanydeclaredonourClassBcommonstock)mustbeapprovedbytheclassof
stockadverselyaectedbytheproposedamendment.Inaddition,ourcerticateofincorporationprovidesthatbeforeanysuch
amendmentmaybeputtoastockholdervote,itmustbeapprovedbytheunanimousconsentofourboardofdirectors.Asa
result,theundistributedearningsforeachyearareallocatedbasedonthecontractualparticipationrightsoftheClassAand
ClassBcommonsharesasiftheearningsfortheyearhadbeendistributed.Astheliquidationanddividendrightsareidentical,
theundistributedearningsareallocatedonaproportionatebasis.Further,asweassumetheconversionofClassBcommon
stockinthecomputationofthedilutednetincomepershareofClassAcommonstock,theundistributedearningsareequalto
netincomeforthatcomputation.
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