Travelzoo 2005 Annual Report Download - page 50

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applies to all voluntary changes in accounting principle, and changes the requirements for accounting for and
reporting of a change in accounting principle. SFAS 154 requires retrospective application to prior periods'
Ñnancial statements of a voluntary change in accounting principle unless it is impracticable. APB 20
previously required that most voluntary changes in accounting principle be recognized with a cumulative eÅect
adjustment in net income of the period of the change. SFAS 154 is eÅective for accounting changes made in
annual periods beginning after December 15, 2005.
In December 2004, FASB issued SFAS 123R, Share-Based Payments, which requires the measurement
of all share-based payments to employees, including grants of employee stock options, using a fair-value-based
method and the recording of such expense in the statement of operations. The accounting provisions of
SFAS 123R are eÅective for annual reporting periods beginning after June 15, 2005. The pro forma
disclosures previously permitted under SFAS 123 will no longer be an alternative to Ñnancial statement
recognition. Although there are currently no unvested stock-based compensation awards outstanding as of
December 31, 2005, the Company may grant such instruments in the future. As a result, the adoption of
SFAS No. 123R could have a signiÑcant impact on the Company's consolidated statement of operations and
net income per share if stock based awards are made in future periods.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
We believe that our potential exposure to changes in market interest rates is not material. The Company
has no outstanding debt and is not a party to any derivatives transactions. We invest in highly liquid
investments with short maturities. Accordingly, we do not expect any material loss from these investments.
Our U.K. operations expose us to foreign currency risk associated with agreements being denominated in
British Sterling Pounds and Euros. Further, we are exposed to foreign currency risk associated with
Öuctuations of the British Sterling Pound as the Ñnancial position and operating results of our U.K. subsidiary
will be translated into U.S. Dollars for consolidation purposes. We do not use derivative instruments to hedge
these exposures.
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