Overstock.com 2011 Annual Report Download - page 114

Table of Contents
Overstock.com, Inc.
Notes to Consolidated Financial Statements (Continued)
2. ACCOUNTING POLICIES (Continued)
any other amount within the range, the minimum amount in the range is accrued. We expense legal fees as incurred.
Restructuring
Restructuring expenses are primarily comprised of lease termination costs. ASC Topic 420, Accounting for Costs Associated with Exit or Disposal
Activities, requires that when an entity ceases using a property that is leased under an operating lease before the end of the contractual term, the termination
costs should be recognized and measured at fair value when the entity ceases using the facility. Key assumptions in determining the restructuring expenses
and related liability include the terms that may be negotiated to exit certain contractual obligations (see Note 3 "Restructuring Expense").
Income taxes
Income taxes are accounted for under the asset and liability method. Deferred income tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis using
enacted tax rates in effect for the year in which the differences are expected to affect taxable income.
Deferred tax assets are evaluated for future realization and are reduced by a valuation allowance to the extent that it is more likely than not that the
deferred tax asset will not be realized. We consider many factors when assessing the likelihood of future realization of our deferred assets including
expectations of future taxable income, the carry-forward periods available for tax reporting purposes, the reversals of our deferred tax liabilities and tax
planning strategies, to the extent available. At December 31, 2011 and December 31, 2010, we have a full valuation allowance against our deferred tax assets,
net of expected reversals of existing deferred tax liabilities, as we believe it is more likely than not that these benefits will not be realized. Significant
judgment is required in making this assessment, and it is very difficult to predict when, if ever, our assessment may conclude that the remaining portion of the
deferred tax assets are realizable.
Earnings (loss) per share
Basic earnings (loss) per share is computed by dividing net income (loss) attributable to common shares by the weighted average number of common
shares outstanding during the period. Diluted earnings (loss) per share is computed by dividing net income (loss) attributable to common shares for the period
by the weighted average number of common and potential common shares outstanding during the period. Potential common shares, comprising incremental
common shares issuable upon the exercise of stock options, restricted stock awards and convertible senior notes are included in the calculation of diluted
earnings (loss) per common share to the extent such shares are dilutive.
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