Tesla 2011 Annual Report Download - page 119

Table of Contents
Advertising and Promotion Costs
Advertising and sales promotion costs are expensed as incurred. During the years ended December 31, 2010, 2009 and 2008, advertising,
promotion and related marketing expenses were $3.1 million, $1.7 million and $0.7 million, respectively.
Income Taxes
Income taxes are computed using the asset and liability method, under which deferred tax assets and liabilities are determined based on the
difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the
differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the
amount expected to be realized.
We record liabilities related to uncertain tax positions when, despite our belief that our tax return positions are supportable, we believe that
it is more likely than not that those positions may not be fully sustained upon review by tax authorities. Accrued interest and penalties related to
unrecognized tax benefits are classified as income tax expense.
Stock-based Compensation
We recognize compensation expense for costs related to all share-based payments, including stock options. The fair value of share-based
payment awards are estimated on the grant date using an option pricing model. Stock-based compensation expense is recognized on a straight-
line basis over the service period, net of estimated forfeitures.
We have elected to use the “with and without” approach in determining the order in which tax attributes are utilized. As a result, we will
only recognize a tax benefit from stock-based awards in additional paid-in capital if an incremental tax benefit is realized after all other tax
attributes currently available to us have been utilized. In addition, we have elected to account for the indirect effects of stock-based awards on
other tax attributes, such as the research tax credit, through our statement of operations.
We account for equity instruments issued to non-employees based on the fair value of the awards. The fair value of the awards granted to
non-employees is re-measured as the awards vest and the resulting change in fair value, if any, is recognized in the consolidated statements of
operations during the period the related services are rendered.
For performance-based awards, stock-based compensation expense is recognized over the expected performance achievement period of
individual performance milestones when the achievement of each individual performance milestone becomes probable.
Foreign Currency Remeasurement and Transactions
For each of our foreign subsidiaries, the functional currency is the U.S. Dollar. For these foreign subsidiaries, monetary assets and
liabilities denominated in non-U.S. currencies are re-measured to U.S. Dollars using current exchange rates in effect at the balance sheet date.
Non
-monetary assets and liabilities denominated in non-U.S. currencies are maintained at historical U.S. Dollar exchange rates. Revenues and
expenses are re-measured at average U.S. Dollar monthly rates.
Foreign currency transaction gains and losses are a result of the effect of exchange rate changes on transactions denominated in currencies
other than the functional currency. Transaction gains and losses are recognized in other expense, net in the consolidated statements of operations
and have not been significant for any periods presented.
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