Washington Post 2012 Annual Report Download - page 86

plan) as an asset or liability in its statement of financial position
and recognizes changes in that funded status in the fiscal year in
which the changes occur through comprehensive income. The
Company measures changes in the funded status of its plans using
the projected unit credit method and several actuarial assumptions,
the most significant of which are the discount rate, the long-term
rate of asset return and rate of compensation increase. The
Company uses a measurement date of December 31 for its
pension and other postretirement benefit plans.
Self-Insurance. The Company uses a combination of insurance and
self-insurance for a number of risks, including claims related to
employee health care and dental care, disability benefits, workers’
compensation, general liability, property damage and business
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 that 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 non-United States operations where the local currency is
the functional currency are translated into United States (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 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. Basic earnings per share is calculated under
the two-class method. The Company treats restricted stock as a
participating security due to its nonforfeitable right to dividends.
Under the two-class method, the Company allocates to the
participating securities their portion of dividends declared and
undistributed earnings to the extent the participating securities may
share in the earnings as if all earnings for the period had been
distributed. Basic earnings per share is calculated by dividing the
income available to common stockholders by the weighted average
number of common shares outstanding during the period. Diluted
earnings per share is calculated similarly except that the weighted
average number of common shares outstanding during the period
includes the dilutive effect of the assumed exercise of options and
restricted stock issuable under the Company’s stock plans. The
dilutive effect of potentially dilutive securities is reflected in diluted
earnings per share by application of the treasury stock method.
Comprehensive Income. Comprehensive income consists of net
income, foreign currency translation adjustments, the change in
unrealized gains (losses) on investments in marketable equity
securities, net changes in cash flow hedge and pension and other
postretirement plan adjustments.
Discontinued Operations. A business is classified as a dis-
continued 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 transaction. 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 June
2011, the Financial Accounting Standards Board (“FASB”) issued
an amended standard to increase the prominence of items reported
in other comprehensive income. The amendment eliminates the
option to present components of other comprehensive income as
part of the statement of changes in stockholders’ equity and requires
74 THE WASHINGTON POST COMPANY