Vistaprint 2010 Annual Report Download - page 76

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Comprehensive Income
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 is composed of net income, unrealized gains and losses on marketable
securities and derivatives, and cumulative foreign currency translation adjustments, which are
disclosed in the accompanying consolidated statements of shareholders’ equity and comprehensive
income.
The components of accumulated other comprehensive (loss) income were as follows:
2010 2009
June 30,
Cumulative translation adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (10,606) $ 3,762
Unrealized gain on cash flow hedge, net of tax of $22 . . . . . . . . . . . . . 49 —
Unrealized loss on marketable securities . . . . . . . . . . . . . . . . . . . . . . . (68) (40)
Accumulated other comprehensive (loss) income . . . . . . . . . . . . . $ (10,625) $ 3,722
Income Taxes
The Company makes estimates and judgments in determining income tax expense, and in the
calculation of tax assets and liabilities. The Company’s corporate tax rate is a combination of the tax
rates of the jurisdictions where it conducts business.
Deferred income taxes are determined using the liability method. Under this method, deferred
tax assets and liabilities are based on the differences between the financial statement carrying values
and the tax bases and are measured by applying currently enacted tax rates and laws to taxable
years in which such differences are expected to reverse. The Company records a valuation allowance
to reduce deferred tax assets to the amount that is believed more likely than not to be realized. The
Company regularly reviews its deferred tax assets for recoverability and estimates a valuation
allowance based on historical taxable income, projected future taxable income and the expected
timing of the reversals of existing temporary differences. Judgment is required to determine, among
other things, whether an increase or decrease of a valuation allowance is warranted. The Company
will increase the valuation allowance if it operates at a loss or is unable to generate sufficient future
taxable income. Any changes in the valuation allowance could affect the Company’s tax expense,
financial position and results of operations.
The Company recognizes, presents and discloses in its financial statements uncertain tax
positions it has taken, or expects to take on a tax return, whereby the Company recognizes the tax
benefit from an uncertain tax position if it is more likely than not that the tax position will be sustained
on examination by the taxing authorities, based on the technical merits of the position. The tax
benefits recognized in the financial statements from such positions are then measured based on the
largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. The
unrecognized tax benefits will reduce the Company’s effective tax rate when recognized. Interest and
penalties related to unrecognized tax benefits are recorded in the provision for income taxes.
The calculation of tax liabilities involves significant judgment in estimating the impact of
uncertainties in the application of GAAP and complex tax laws. Resolution of these uncertainties in a
manner inconsistent with the Company’s expectations could have a material impact on the Company’s
financial condition and operating results.
72