ServiceMagic 2010 Annual Report Download - page 69

Table of Contents
IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Amortization of Non-Cash Marketing
Amortization of non-cash marketing consists of non-cash advertising credits secured from Universal Television as part of the transaction
pursuant to which Vivendi Universal Entertainment LLLP ("VUE") was created, and the subsequent transaction by which IAC sold its
partnership interests in VUE (collectively referred to as the "NBC Universal Advertising"). The NBC Universal Advertising was available for
television advertising on various NBC Universal network and cable channels without any cash cost. All NBC Universal Advertising credits were
used prior to December 31, 2009.
Legal Costs
Legal costs are expensed as incurred.
Income Taxes
The Company accounts for income taxes under the liability method, and deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement carrying values of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are
expected to be recovered or settled. A valuation allowance is provided on deferred tax assets if it is determined that it is more likely than not that
the deferred tax asset will not be realized. The Company records interest, net of any applicable related income tax benefit, on potential tax
contingencies as a component of income tax expense.
The Company recognizes liabilities for uncertain tax positions based on a two-step process. The first step is to evaluate the tax position for
recognition by determining if the weight of available evidence indicates it is more likely than not that the position will be sustained on audit,
including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount which is
more than 50% likely of being realized upon ultimate settlement.
Earnings Per Share
Basic earnings per share ("Basic EPS") is computed by dividing net earnings attributable to IAC shareholders by the weighted average
number of common shares outstanding during the period. Diluted earnings per share ("Diluted EPS") reflects the potential dilution that could
occur if stock options and other commitments to issue common stock were exercised or equity awards vest resulting in the issuance of common
stock that could share in the earnings of the Company.
Foreign Currency Translation and Transaction Gains and Losses
The financial position and operating results of substantially all foreign operations are consolidated using the local currency as the functional
currency. Local currency assets and liabilities are translated at the rates of exchange as of the balance sheet date, and local currency revenue and
expenses are translated at average rates of exchange during the period. Translation gains and losses are included in accumulated other
comprehensive income as a component of shareholders' equity. In addition, translation gains and losses related to the Company's foreign equity
method investment are included in accumulated other comprehensive income as a component of shareholders' equity. Transaction gains and
losses resulting from assets and liabilities denominated in a currency other than the functional
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