Washington Post 2010 Annual Report Download - page 86

interruption. Liabilities associated with these plans are estimated
based on, among other things, the Company’s historical claims
experience, severity factors and other actuarial assumptions. The
expected loss accruals are based on estimates, and while the
Company believes the amounts accrued are adequate, the ultimate
loss may differ from the amounts provided.
Income Taxes—The Company accounts for income taxes under
the asset and liability method, which requires the recognition of
deferred tax assets and liabilities for the expected future tax
consequences of events that have been included in the financial
statements. Under this method, deferred tax assets and liabilities are
determined based on the differences between the financial
statements and tax basis of assets and liabilities using enacted tax
rates in effect for the year in which the differences are expected to
reverse. The effect of a change in tax rates on deferred tax assets
and liabilities is recognized in income in the period that includes the
enactment date.
The Company records net deferred tax assets to the extent that it
believes these assets will more likely than not be realized. In making
such determination, the Company considers all available positive
and negative evidence, including future reversals of existing taxable
temporary differences, projected future taxable income, tax
planning strategies and recent financial operations; this evaluation
is made on an ongoing basis. In the event the Company were to
determine that it was able to realize net deferred income tax assets
in the future in excess of their net recorded amount, the Company
would record an adjustment to the valuation allowance, which
would reduce the provision for income taxes.
The Company recognizes a tax benefit from an uncertain tax
position when it is more likely than not that the position will be
sustained upon examination, including resolutions of any related
appeals or litigation processes, based on the technical merits. The
Company records a liability for the difference between the benefit
recognized and measured for financial statement purposes and the
tax position taken or expected to be taken on the Company’s tax
return. Changes in the estimate are recorded in the period in which
such determination is made.
Foreign Currency Translation—Income and expense accounts of
the Company’s foreign operations where the local currency is the
functional currency are translated into U.S. dollars using the current
rate method, whereby operating results are converted at the
average rate of exchange for the period, and assets and liabilities
are converted at the closing rates on the period end date. Gains
and losses on translation of these accounts and the Company’s
equity investment in its foreign affiliates are accumulated and
reported as a separate component of equity and other
comprehensive income. Gains and losses on foreign currency
transactions, including foreign currency denominated intercompany
loans on entities with a functional currency in U.S. dollars, are
recognized in the Consolidated Statements of Operations.
Equity-Based Compensation—The Company measures
compensation expense for awards settled in shares based on
the grant date fair value of the award. The Company measures
compensation expense for awards settled in cash, or that may be
settled in cash, based on the fair value at each reporting date. The
Company recognizes the expense over the requisite service period,
which is generally the vesting period of the award.
Earnings Per Share—Earnings per share is calculated under the
two-class method. Basic earnings per share is calculated using the
weighted average number of common shares outstanding during the
period. Diluted earnings per share is calculated similarly except that
the computation includes the dilutive effect of the assumed exercise of
options and restricted stock issuable under the Company’s stock plans.
Comprehensive Income—Comprehensive income consists of net
income, foreign currency translation adjustments, the change in
unrealized gains (losses) on investments in marketable equity
securities and pension and other postretirement plan adjustments.
Discontinued Operations—A business is classified as a
discontinued operation when (i) the operations and cash flows of
the business can be clearly distinguished and have been or will be
eliminated from the Company’s ongoing operations; (ii) the business
has either been disposed of or is classified as held for sale; and
(iii) the Company will not have any significant continuing
involvement in the operations of the business after the disposal
transactions. The results of discontinued operations (as well as the
gain or loss on the disposal) are aggregated and separately
presented in the Company’s Consolidated Statements of
Operations, net of income taxes.
Recently Adopted and Issued Accounting Pronouncements—In
October 2009, the Financial Accounting Standards Board (“FASB”)
issued new guidance that modifies the fair value requirement of
multiple element revenue arrangements. The new guidance allows
the use of the “best estimate of selling price” in addition to vendor-
specific objective evidence (“VSOE”) and third-party evidence
(“TPE”) for determining the selling price of a deliverable. A vendor is
now required to use its best estimate of the selling price when VSOE
or TPE of the selling price cannot be determined. In addition, the
residual method of allocating arrangement consideration is no
longer permitted. The guidance requires expanded qualitative and
quantitative disclosures and is effective for revenue arrangements
entered into or materially modified in fiscal years beginning on or
after June 15, 2010. The Company will adopt this guidance in the
first quarter of 2011. The Company does not expect the
implementation of this guidance to have a material impact on its
Consolidated Financial Statements.
In January 2010, the FASB issued additional disclosure requirements
for fair value measurements. The guidance requires previous fair
value hierarchy disclosures to be further disaggregated by class of
assets and liabilities. A class is often a subset of assets or liabilities
within a line item in the statement of financial position. In addition,
significant transfers between Levels 1 and 2 of the fair value
hierarchy are required to be disclosed. These additional requirements
became effective for interim and annual periods beginning after
December 15, 2009, and did not have an impact on the
Consolidated Financial Statements of the Company. In addition,
the fair value disclosure amendments also require more detailed
disclosures of the changes in Level 3 instruments. These changes will
not become effective until interim and annual periods beginning after
70 THE WASHINGTON POST COMPANY