Vistaprint 2008 Annual Report Download - page 52

June 30, 2007, we had unrecognized tax benefits of approximately $0.4 million, and as of June 30,
2008, we had unrecognized tax benefits of $0.9 million which will reduce the effective tax rate when
recognized. There have been no significant changes to these amounts during the year ended June 30,
2008. We recognize interest and penalties related to unrecognized tax benefits in our provision for
income taxes. The amount of interest and penalties accrued upon adoption of FIN 48 and at June 30,
2007 and 2008 was $6,000 and $27,000 respectively.
Share-Based Compensation. Accounting for share options and restricted share units (RSUs)
follows the provision of SFAS No. 123R, Share Based Payment, (SFAS 123R). The provision requires
an entity to measure cost of an award of equity instruments based on the grant-date fair value of the
award. In general, that cost will be recognized over the period which the recipient is required to provide
service in exchange for the award. We use the Black-Scholes option pricing model to measure the fair
vale of stock options and RSUs. This model requires significant estimates related to the award’s
expected life and future stock price volatility of the underlying equity security.
Litigation and Contingencies. We are subject to various loss contingencies arising in the
ordinary course of business. We consider the likelihood of loss or impairment of an asset or the
incurrence of a liability, as well as our ability to reasonably estimate the amount of loss in determining
loss contingencies. An estimated loss contingency is accrued when it is probable that an asset has
been impaired or a liability has been incurred and the amount of loss can be reasonably estimated. We
regularly evaluate current information available to us to determine whether such accruals should be
adjusted.
Four class action lawsuits have been brought against VistaPrint USA, Inc., VistaPrint Corp. and/
or VistaPrint Ltd. and two third party merchants asserting substantially identical claims relating to third
party membership reward programs offered by the third party merchants on our vistaprint.com website.
The outcome of these actions is not presently determinable, and as such, we are currently unable to
estimate the potential range of loss, if any, relating to these actions. Accordingly, no provision for this
matter has been made in the accompanying consolidated financial statements. Additional information
regarding this matter is included under “Item 3. Legal Proceedings.”
Recent Accounting Pronouncements
In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (“SFAS 157”),
which defines fair value, establishes a framework for measuring fair value in generally accepted
accounting principles, and expands disclosures about fair value measurements. SFAS 157 applies
under other accounting pronouncements that require or permit fair value measurements. SFAS 157 is
effective for financial statements issued for fiscal years beginning after November 15, 2007, and
interim periods within those fiscal years. We do not believe that the adoption of SFAS 157 will have a
material impact on our consolidated financial statements.
In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets
and Financial Liabilities—Including an Amendment of FASB Statement No. 115 (“SFAS 159”). SFAS
159 allows for the choice to measure certain financial instruments and certain other items at fair value.
This allows a company to mitigate volatility in reported earnings caused by measuring related assets
and liabilities differently without having to apply complex hedge accounting provisions. SFAS 159 is
effective for fiscal years beginning after November 15, 2007. We do not believe that the adoption of
SFAS 159 will have a material impact on our consolidated financial statements.
In December 2007, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 141(R)
Business Combinations (“SFAS 141(R)”). SFAS 141(R) states that all business combinations (whether
full, partial or step acquisitions) will result in all assets and liabilities of an acquired business being
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