ServiceMagic 2011 Annual Report Download - page 72

IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
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. Transaction gains and losses resulting from assets and liabilities denominated in
a currency other than the functional currency are included in the consolidated statement of operations as a component of other income (expense),
net.
Translation gains and losses relating to foreign entities that are liquidated or substantially liquidated are reclassified out of accumulated
other comprehensive income into earnings. Such gains totaled $9.2 million during the year ended December 31, 2011 and are included in "Loss
from discontinued operations, net of tax" in the accompanying consolidated statement of operations.
Stock-Based Compensation
Stock-based compensation is measured at the grant date based on the fair value of the award and expensed over the requisite service period.
See Note 14 for a further description of the Company's stock-based compensation plans.
Redeemable Noncontrolling Interests
In connection with the acquisition of certain subsidiaries, management of these businesses has retained an ownership interest. The Company
is party to fair value put and call arrangements with respect to these interests. These put and call arrangements allow management of these
businesses to require the Company to purchase their interests or allow the Company to acquire such interests at fair value, respectively. These
put and call arrangements become exercisable by the Company and the counter-party at various dates over the next five years. During 2011, one
of these arrangements became exercisable. There were no put and call arrangements that became exercisable during 2010. These put
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