Green Dot 2010 Annual Report Download - page 76

Note 2 — Summary of Significant Accounting Policies (continued)
deferred tax assets and liabilities represent decreases or increases in taxes expected to be paid in the
future because of future reversals of temporary differences between the bases of assets and liabilities as
measured by tax laws and their bases as reported in our consolidated financial statements. We also
recognize deferred tax assets for tax attributes such as net operating loss carryforwards and tax credit
carryforwards. We record valuation allowances to reduce deferred tax assets to the amounts we conclude
are more likely-than-not to be realized in the foreseeable future.
We recognize and measure income tax benefits based upon a two-step model: 1) a tax position must
be more likely-than-not to be sustained based solely on its technical merits in order to be recognized, and
2) the benefit is measured as the largest dollar amount of that position that is more likely-than-not to be
sustained upon settlement. The difference between the benefit recognized for a position and the tax
benefit claimed on a tax return is referred to as an unrecognized tax benefit. We accrue income tax related
interest and penalties, if applicable, within income tax expense.
For additional information, refer to Note 6 — Income Taxes.
Earnings Per Common Share
We have multiple classes of common stock and our preferred stockholders, during the periods their
shares were outstanding, were entitled to participate with common stockholders in the distributions of
earnings through dividends. Therefore, we apply the two-class method in calculating earnings per
common share, or EPS. The two-class method requires net income, after deduction of any preferred
stock dividends, deemed dividends on preferred stock redemptions, and accretions in the carrying value
on preferred stock, to be allocated between each class or series of common and preferred stockholders
based on their respective rights to receive dividends, whether or not declared. Basic EPS is then calculated
by dividing net income allocated to each class of common stockholders by the respective weighted-
average common shares issued and outstanding.
In addition, for diluted EPS, the conversion of Class B common stock can affect net income allocated
to Class A common stockholders. Where the effect of this conversion is dilutive, we adjust net income
allocated to Class A common stockholders by the associated allocated earnings of the convertible
securities. We divide adjusted net income for each class of common stock by the respective weighted-
average number of the common shares issued and outstanding for each period plus amounts representing
the dilutive effect of outstanding stock options and outstanding warrants, shares to be purchased under our
employee stock purchase plan and the dilution resulting from the conversion of convertible securities, if
applicable. We exclude the effects of convertible securities and outstanding warrants and stock options
from the computation of diluted EPS in periods in which the effect would be antidilutive. We calculate
dilutive potential common shares using the treasury stock method, if-converted method and the two-class
method, as applicable.
For additional information, refer to Note 11 — Earnings Per Common Share.
Fair Values of Financial Instruments
Our financial instruments, including unrestricted cash and cash equivalents, restricted cash, settle-
ment assets and obligations, accounts receivable, certain other assets, accounts payable, and other
accrued liabilities, are short-term, and, accordingly, we believe their carrying amounts approximate their
respective fair values.
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GREEN DOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)