ServiceMagic 2014 Annual Report Download - page 74

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IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Earnings Per Share
Basic earnings per share 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 reflects the potential dilution that could occur if stock options and other
commitments to issue common stock were exercised or equity awards vested 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 foreign entities whose primary economic environment is based on their local currency are
consolidated using the local currency as the functional currency. These local currency assets and liabilities are translated at the rates of exchange as
of the balance sheet date, and local currency revenue and expenses of these operations 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 (expense) income, 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.
Stock-Based Compensation
Stock-based compensation is measured at the grant date based on the fair value of the award and is generally expensed over the requisite
service period. See Note 12 for a discussion of the Company's stock-based compensation plans.
Redeemable Noncontrolling Interests
Noncontrolling interests in the consolidated subsidiaries of the Company should ordinarily be reported on the consolidated balance sheet
within shareholders' equity, separately from the Company's equity. However, securities that are redeemable at the option of the holder and not
solely within the control of the issuer must be classified outside of shareholders' equity. Accordingly, if redemption of the noncontrolling interests is
outside the control of the Company, the interests are included outside of shareholders' equity in the accompanying consolidated balance sheet.
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. The put
arrangements do not meet the definition of a derivative instrument as the put agreements do not provide for net settlement. These put and call
arrangements become exercisable by the Company and the counter-party at various dates over the next four years. No put and call arrangements
were exercised during 2014 and 2012. During 2013, two of these arrangements were exercised. These put arrangements are exercisable by the
counter-party outside the control of the Company. Accordingly, to the extent that the fair value of these interests exceeds the value determined by
normal noncontrolling interest accounting, the value of such interests is adjusted to fair value with a corresponding adjustment to additional paid-in
capital. During the years ended December 31, 2014 , 2013 and 2012 , the Company recorded adjustments of $27.8 million , $40.6 million and $4.3
million , respectively, to increase these interests to fair value. Fair value determinations require high levels of judgment and are based on various
valuation techniques, including market comparables and discounted cash flow projections.
Recent Accounting Pronouncement
In May 2014, the Financial Accounting Standards Board issued Accounting Standards Update ("ASU") No. 2014-09,
Revenue from Contracts
with Customers, which clarifies the principles for recognizing revenue and develops a common standard for all industries. The new guidance is
effective for reporting periods beginning after December 15, 2016. Entities have the option of using either a full retrospective or cumulative effect
approach to adopt ASU No. 2014-09. The Company is currently evaluating the new guidance and has not yet determined whether the adoption of
the new standard will have a material impact on its consolidated financial statements or the method of adoption.
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