Washington Post 2014 Annual Report Download - page 82

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 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 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
April 2014, the Financial Accounting Standards Board (FASB)
issued new guidance that modifies the requirements for reporting
discontinued operations. The new guidance requires the reporting of
the disposal of an entity or component of an entity as discontinued
operations if the disposal represents a strategic shift that has or will
have a major effect on the entity’s operations and financial results.
The new guidance also expands the disclosures for discontinued
operations and requires new disclosures related to individually
material disposals that do not meet the definition of a discontinued
operation. This guidance is effective for interim and fiscal years
beginning after December 15, 2014. Early adoption is permitted
for disposals that have not been reported in financial statements
previously issued or available for issuance. The impact of the
guidance on the Company’s Consolidated Financial Statements will
depend on its future disposal activity.
In May 2014, the FASB issued comprehensive new guidance that
supersedes all existing revenue recognition guidance. The new
guidance requires revenue to be recognized when the Company
66 GRAHAM HOLDINGS COMPANY