Washington Post 2006 Annual Report Download - page 71

the fair market value would be reduced for estimated costs to Financial Accounting Standards No. 123 (SFAS 123), ""Account-
dispose. ing for Stock-Based Compensation.'' This change in accounting
method was applied prospectively to all awards granted from the
Program Rights. The broadcast subsidiaries are parties to beginning of the Company's fiscal year 2002 and thereafter. Stock
agreements that entitle them to show syndicated and other pro- options awarded prior to fiscal year 2002, which were 100%
grams on television. The costs of such program rights are recorded vested by the end of 2005, were accounted for under the intrinsic
when the programs are available for broadcasting, and such costs value method under Accounting Principles Board Opinion No. 25,
are charged to operations as the programming is aired. ""Accounting for Stock Issued to Employees.'' The following table
Revenue Recognition. Education revenue is recognized ratably presents what the Company's results would have been had the fair
over the period during which educational services are delivered. At values of options granted prior to 2002 been recognized as
Kaplan's test preparation division, estimates of average student compensation expense in 2005 and 2004 (in thousands, except
course length are developed for each course, and these estimates per share amounts).
are evaluated on an ongoing basis and adjusted as necessary. 2005 2004
Revenue from media advertising is recognized, net of agency
Net income available for common shares, as
commissions, when the underlying advertisement is published or
reported ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $313,363 $331,740
broadcast. Revenues from newspaper and magazine subscriptions Add: Company stock option compensation
and retail sales are recognized upon the later of delivery or cover expense included in net income, net of
related tax effects ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 694 536
date, with adequate provision made for anticipated sales returns.
Deduct: Total Company stock option
Cable subscriber revenue is recognized monthly as services are compensation expense determined under the
delivered. fair-value-based method for all awards, net
of related tax effectsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (1,071) (2,946)
The Company bases its estimates for sales returns on historical Pro forma net income available for common
experience and has not experienced significant fluctuations shares ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $312,986 $329,330
between estimated and actual return activity. Amounts received Basic earnings per share, as reported ÏÏÏÏÏÏÏÏÏ $ 32.66 $ 34.69
Pro forma basic earnings per shareÏÏÏÏÏÏÏÏÏÏÏÏ $ 32.62 $ 34.44
from customers in advance of revenue recognition are deferred as Diluted earnings per share, as reportedÏÏÏÏÏÏÏÏ $ 32.59 $ 34.59
liabilities. Deferred revenue to be earned after one year is included Pro forma diluted earnings per share ÏÏÏÏÏÏÏÏÏÏ $ 32.55 $ 34.34
in ""Other Liabilities'' in the Consolidated Balance Sheets.
In the first quarter of 2006, the Company adopted Statement of
Pensions and Other Postretirement Benefits. Note H pro- Financial Accounting Standards No. 123R (SFAS 123R), ""Share-
vides detailed information on the Company's pension and other Based Payment.'' SFAS 123R requires companies to record the cost
postretirement plans, including the adoption of SFAS 158. of employee services in exchange for stock options based on the
grant-date fair value of the awards. SFAS 123R did not have any
Income Taxes. The provision for income taxes is determined
impact on the Company's results of operations for Company stock
using the asset and liability approach. Under this approach,
options as the Company adopted the fair-value-based method of
deferred income taxes represent the expected future tax conse-
accounting for Company stock options in 2002. However, the
quences of temporary differences between the carrying amounts
adoption of SFAS 123R required the Company to change its
and tax bases of assets and liabilities. The Company is required to
accounting for Kaplan equity awards from the intrinsic value method
adopt FASB Interpretation No. 48 (FIN 48), ""Accounting for
to the fair-value-based method of accounting. This change in
Uncertainty in Income Taxes Ì an Interpretation of FASB Statement
accounting results in the acceleration of expense recognition for
No. 109,'' in the first quarter of 2007. FIN 48 prescribes a
Kaplan equity awards. As a result, for the year ended Decem-
comprehensive model of how a company should recognize, mea-
ber 31, 2006, the Company reported a $5.1 million after-tax
sure, present and disclose in its financial statements uncertain tax
charge for the cumulative effect of change in accounting for Kaplan
positions that the company has taken or expects to take on a tax
equity awards ($8.2 million in pre-tax Kaplan stock compensation
return. See Note D for additional details surrounding FIN 48.
expense).
Foreign Currency Translation. Gains and losses on foreign
currency transactions and the translation of the accounts of the B. ACCOUNTS RECEIVABLE AND ACCOUNTS PAYABLE
AND ACCRUED LIABILITIES
Company's foreign operations where the U.S. dollar is the function-
al currency are recognized currently in the Consolidated Statements Accounts receivable at December 31, 2006 and January 1, 2006
of Income. Gains and losses on translation of the accounts of the consist of the following (in thousands):
Company's foreign operations where the local currency is the
functional currency, and the Company's equity investment in its 2006 2005
foreign affiliates, are accumulated and reported as a separate Trade accounts receivable, less estimated
component of equity and comprehensive income. returns, doubtful accounts and
allowances of $86,227 and $78,099 $400,380 $375,668
Stock Options. Effective the first day of the Company's 2002
Other accounts receivableÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 23,023 22,884
fiscal year, the Company adopted the fair-value-based method of $423,403 $398,552
accounting for Company stock options as outlined in Statement of
2006 FORM 10-K 55