Vistaprint 2008 Annual Report Download - page 75

VISTAPRINT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Years Ended June 30, 2008, 2007 and 2006
(in thousands, except share and per share data)
financial statements. Comprehensive income is defined as the change in equity of a business
enterprise during a period from transactions and other events and circumstances from non-owner
sources. Comprehensive income (loss) is composed of net income (loss), unrealized gains and losses
on marketable securities and cumulative foreign currency translation adjustments, which are disclosed
in the accompanying consolidated statements of redeemable convertible preferred shares and
shareholders’ equity.
The components of accumulated other comprehensive income were as follows (in thousands):
June 30,
2008 2007
Unrealized loss on marketable securities ........................................ $ (52) $ (13)
Cumulative translation adjustments ............................................. 8,144 1,935
Accumulated other comprehensive income .................................. $8,092 $1,922
Income Taxes
VistaPrint Limited is a Bermuda based company. Bermuda currently does not impose any tax
computed on profits or income, which results in a zero tax liability for the Company on any profits
recorded in Bermuda. VistaPrint Limited has operating subsidiaries in the Netherlands, Canada,
Jamaica, Spain, Switzerland and the United States. VistaPrint Limited has entered into service
agreements, which are also referred to as transfer pricing agreements, with each of its operating
subsidiaries. These agreements effectively result in VistaPrint Limited paying each of these
subsidiaries for its costs plus a fixed mark-up. The Jamaican subsidiary’s tax rate is zero because it is
located in a tax free zone. Our Dutch, Canadian, Spanish and United States subsidiaries are each
located in jurisdictions that tax profits and, accordingly, regardless of the Company’s consolidated
results of operations, each of these subsidiaries will pay taxes in its respective jurisdiction.
The Company provides for income taxes under the liability method prescribed by SFAS No. 109,
Accounting for Income Taxes. Under this method, income taxes are provided for amounts currently
payable and for deferred tax assets and liabilities, which are determined based on the differences
between the financial statement carrying amounts and the tax bases of existing assets and liabilities.
Deferred income taxes are measured using enacted tax rates in effect for the year in which the
differences are expected to reverse. Valuation allowances are established when necessary to reduce
deferred tax assets to the amounts expected to be realized.
Foreign Currency Translation
The majority of the Company’s non-U.S. sales orders are manufactured by the Company’s Dutch
subsidiary which has the euro as its functional currency. The Company’s Spanish subsidiary, which
operates a marketing office in Barcelona, Spain, also has the euro as its functional currency. The
Company’s Swiss subsidiary, which operates a technology development facility in Winterthur,
Switzerland, has the Swiss franc as its functional currency. The Company’s Dutch, Swiss and Spanish
subsidiaries translate their assets and liabilities at current rates of exchange in effect at the balance
sheet date. The resulting gains and losses from translation are included as a component of other
comprehensive income. All other subsidiaries have the U.S. dollar as their functional currency and
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Form 10-K