Urban Outfitters 2010 Annual Report Download - page 62

URBAN OUTFITTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Net Income Per Common Share
Basic net income per common share is computed by dividing net income available to common
shareholders by the weighted average number of common shares outstanding. Diluted net income per
common share is computed by dividing net income available to common shareholders by the weighted
average number of common shares outstanding, after giving effect to the potential dilution from the
exercise of securities, such as stock options and non-vested shares, into shares of common stock as if
those securities were exercised (see Note 10).
Accumulated Other Comprehensive Income
Comprehensive income is comprised of two subsets—net income and other comprehensive
income. Amounts in accumulated other comprehensive income relate to foreign currency translation
adjustments and unrealized gains or losses on marketable securities. The foreign currency translation
adjustments are not adjusted for income taxes because these adjustments relate to indefinite
investments in non-U.S. subsidiaries. Accumulated other comprehensive income consisted of foreign
currency translation losses of $7,323 and $14,496 as of January 31, 2010 and January 31, 2009,
respectively. Other comprehensive income included an unrealized loss, net of tax, on marketable
securities of $1,771 and 3,251 as of January 31, 2010 and January 31, 2009, respectively. Gross
realized gains are included in other income and were not material to the Company’s financial
statements for all three years presented.
Foreign Currency Translation
The financial statements of the Company’s foreign operations are translated into U.S. dollars.
Assets and liabilities are translated at current exchange rates while income and expense accounts are
translated at the average rates in effect during the year. Translation adjustments are not included in
determining net income, but are included in accumulated other comprehensive income within
shareholders’ equity. As of January 31, 2010, 2009 and 2008, foreign currency translation adjustments
resulted in losses of $7,323, $14,496 and gains of $5,370, respectively.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist
principally of cash, cash equivalents, marketable securities and accounts receivable. The Company
manages the credit risk associated with cash, cash equivalents and marketable securities by investing
high-quality securities held with reputable trustees and, by policy, limiting the amount of credit
exposure to any one issue. The Company’s investment policy requires that the majority of its cash,
cash equivalents and marketable securities are invested in federally insured or guaranteed investment
vehicles such as federal government agencies, FDIC insured corporate bonds, irrevocable pre-refunded
municipal bonds and United States treasury bills. Receivables from third-party credit cards are
processed by financial institutions, which are monitored for financial stability. The Company
periodically evaluates the financial condition of its wholesale segment customers. The Company’s
allowance for doubtful accounts reflects current market conditions and management’s assessment
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