Vistaprint 2014 Annual Report Download - page 62

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economically hedge certain of our risks, even though we may not elect to apply hedge accounting or the instrument
may not qualify for hedge accounting. The changes in the fair value of derivatives not designated as being in hedging
relationships are recorded directly in earnings as a component of other income (expense), net. In accordance with the
fair value measurement guidance, our accounting policy is to measure the credit risk of our derivative financial
instruments that are subject to master netting agreements on a net basis by counterparty portfolio. We execute our
derivative instruments with financial institutions that we judge to be credit-worthy, defined as institutions that hold an
investment grade credit rating.
Restructuring
Restructuring costs are recorded in connection with initiatives designed to improve efficiency or enhance
competitiveness. Restructuring initiatives require us to make estimates in several areas, including expenses for
severance and other employee separation costs and our ability to generate sublease income to enable us to
terminate lease obligations at the estimated amounts. One-time termination benefits are expensed at the date we
notify the employee, unless the employee must provide future service beyond the statutory minimum retention
period, in which case the benefits are expensed ratably over the future service period. Liabilities for costs
associated with an exit or disposal activity are recognized when the liability is incurred, as opposed to when
management commits to an exit plan, and are measured at fair value. Restructuring costs are included as a
component of each related operating expense within our consolidated statement of operations.
Shareholders’ Equity
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 (loss) is
composed of net income, unrealized gains and losses on marketable securities and derivatives, unrealized loss on
pension benefit obligation, and cumulative foreign currency translation adjustments, which are included in the
accompanying consolidated statements of comprehensive income.
Treasury Shares
Treasury shares are accounted for using the cost method and are included as a component of
shareholders' equity. We reissue treasury shares as part of our share-based compensation programs, and upon
issuance we determine the cost using the average cost method. Effective January 28, 2013, 5,869,662 of our
ordinary shares issued and held in our treasury account were canceled and have become authorized but unissued
ordinary shares, as authorized by our shareholders on November 8, 2012. These canceled shares represent the
remaining balance as of November 8, 2012 of the ordinary shares that were held in treasury at the date of the
redomiciliation of our publicly traded parent company from Bermuda to the Netherlands in August 2009. The
cancellation of the treasury shares resulted in a reduction of additional paid in capital and retained earnings for the
year ended June 30, 2013.
Revenue Recognition
We generate revenue primarily from the sale and shipping of customized manufactured products, as well
as providing digital services, website design and hosting, email marketing services, order referral fees and other
third party offerings. We recognize revenue arising from sales of products and services when it is realized or
realizable and earned. We consider revenue realized or realizable and earned when it has persuasive evidence of
an arrangement, the product has been shipped or service rendered with no significant post-delivery obligations on
our part, the net sales price is fixed or determinable and collectability is reasonably assured. For subscription
services we recognize revenue for the fees charged to customers ratably over the term of the service arrangement.
Revenue is recognized net of discounts we offer to our customers as part of advertising campaigns. Revenues from
sales of prepaid orders on our websites are deferred until shipment of fulfilled orders or until the prepaid service has
been rendered.
For arrangements with multiple deliverables, we allocate revenue to each deliverable if the delivered item(s)
has value to the customer on a standalone basis and, if the arrangement includes a general right of return relative
to the delivered item, delivery or performance of the undelivered item(s) is considered probable and substantially
within our control. The fair value of the selling price for a deliverable is determined using a hierarchy of (1)