Netgear 2011 Annual Report Download - page 73

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Table of Contents
accordance with the provisions of the updated authoritative guidance for stock compensation. The valuation provisions also apply to grants that
are modified after January 1, 2006. The Company recognizes these compensation costs on a straight-line basis over the requisite service period
of the award, which is generally the option vesting term of four years. The Company will recognize an excess benefit from stock-based
compensation in equity based on the difference between tax expense computed with consideration of the windfall deduction and without
consideration of the windfall deduction. In addition, the Company accounts for the indirect effects of stock-based compensation on the research
tax credit and the foreign tax credit in the income statement. See Note 11, Employee Benefit Plans , of the Notes to Consolidated Financial
Statements for a further discussion on stock-based compensation.
Comprehensive income
Comprehensive income consists of net income and other gains and losses affecting stockholder’s equity that the Company excluded from
net income, including gains and losses related to fair value of short-term investments and the effective portion of cash flow hedges that were
outstanding as of the end of the year.
Foreign currency translation
The Company’s functional currency is the U.S. dollar for all of its international subsidiaries. Foreign currency transactions of international
subsidiaries are re-measured into U.S. dollars at the end-of-period exchange rates for monetary assets and liabilities, and historical exchange
rates for non-monetary assets. Expenses are re-measured at average exchange rates in effect during each period, except for expenses related to
non-monetary assets, which are re-measured at historical exchange rates. Revenue is re-
measured at average exchange rates in effect during each
period. Gains and losses arising from foreign currency transactions are included in total comprehensive income and were a net gain of $131,000
for the year ended December 31, 2011, a net loss of $130,000 for the year ended December 31, 2010 and a net gain of $954,000 for the year
ended December 31, 2009.
Recent accounting pronouncements
In December 2010, the FASB issued ASU 2010-29, “Business Combinations (Topic 805): Disclosure of Supplementary Pro Forma
Information for Business Combinations.” ASU 2010-
29 specifies that, for material business combinations when comparative financial statements
are presented, revenue and earnings of the combined entity should be disclosed as though the business combination had occurred as of the
beginning of the comparable prior annual reporting period. ASU 2010-29 also expands the supplemental pro forma disclosures to include a
description of the nature and amount of material, nonrecurring pro forma adjustments directly attributable to the business combination included
in the reported pro forma revenue and earnings. ASU 2010-29 is effective prospectively for the Company for business combinations with an
acquisition date on or after January 1, 2011. Since the adoption of the update to the authoritative guidance for consolidation only requires
additional disclosures, the adoption did not impact the Company’s consolidated financial position, results of operations or cash flows.
In May 2011, the FASB issued ASU 2011-04, “Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements
in U.S. GAAP and IFRSs”, which amends current fair value measurement and disclosure guidance to converge with International Financial
Reporting Standards (“IFRS”) and provides increased transparency around valuation inputs and investment categorization. ASU 2011-04 is
effective prospectively for the Company in the first quarter of fiscal 2012. ASU 2011-04 will only impact the Company’s “Level 3” disclosures.
The adoption is not expected to have a material impact on the Company’s consolidated financial position, results of operations or cash flows.
In June 2011, the FASB issued ASU 2011-05, “Presentation of Comprehensive Income.” ASU 2011-05 eliminates the current option to
report other comprehensive income and its components in the statement of changes in equity. ASU 2011-
05 allows two presentation alternatives:
present items of net income and other comprehensive income (1) in one continuous statement, referred to as the statement of comprehensive
income or
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