eTrade 2005 Annual Report Download - page 120

Table of Contents
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The stock purchase commitment is based on the fair value of the issuer’s equity shares,
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The Company could not be required to net cash settle the stock purchase contract,
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The Company has sufficient authorized and unissued shares available to settle the stock purchase contract, and
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There is an explicit limit on the number of shares of common stock required to be delivered under the stock purchase contract.
Based on our review of the above criterion and other relevant technical requirements, the stock purchase contracts are included in
equity.
Foreign Currency Translation
—Assets and liabilities of consolidated subsidiaries outside of the United States are translated into
U.S. dollars using the exchange rate in effect at each period end. Revenues and expenses are translated at the average exchange rate
during the period. The effects of foreign currency translation adjustments arising from differences in exchange rates from period to
period are deferred and included in AOCI as the functional currency of our subsidiaries is their local currency. Currency transaction
gains or losses, derived on monetary assets and liabilities stated in a currency other than the functional currency, are recognized in
current operations and have not been significant to the Company’s operating results in any period.
Advertising and Market Development
—Advertising production costs are expensed when the initial advertisement is run. Costs of
print advertising are expensed as the services are received.
Share-Based Payments
—Effective July1, 2005, the Company early adopted SFAS No.123(R),
Share-Based Payment
and Staff
Accounting Bulletin No.107,
Share-Based Payment
, using the modified prospective application method to account for its share-based
compensation plans. Upon adoption, the Company began expensing options as compensation and benefits with a one-time pre-tax
credit of $2.8 million in cumulative effect of accounting change related to estimated forfeiture on restricted stock for its adoption in
2005 related to restricted stock awards. Results for prior periods have not been restated. Prior to July1, 2005, the Company accounted
for its employee stock option and awards under Accounting Principles Board (“APB”) Opinion No.25,
Accounting for Stock Issued to
Employees
, and related interpretations, and accordingly, did not record compensation costs for option grants to employees if the
exercise price equaled the fair market value on the grant date. Additionally, for restricted stock awards, compensation was recorded on
a straight-line basis over the vesting period of the awards with forfeitures recorded as they occurred.
Under this transition method, compensation cost in 2005 includes the portion of options and awards vesting in the period for (1)all
share-based payments granted prior to, but not vested as of July1, 2005, based on the grant date fair value estimated in accordance
with the original provisions of SFAS No.123,
Accounting for Stock-Based Compensation
and (2)all share-based payments granted
subsequent to July1, 2005, based on the grant date fair value estimated in accordance with the provisions of SFAS No.123(R.)
Compensation cost for options granted prior to July1, 2005 is recognized on an accelerated amortization method over the vesting
period of the options using an estimated forfeiture rate. Compensation cost for options granted on or after July1, 2005 is recognized on
a straight-line basis over the vesting period using an estimated forfeiture rate. Also under SFAS No.123(R), the Company has reflected
the tax benefit from tax deduction in excess of compensation recognized as a financing activity in the consolidated statements of cash
flows.
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2006. EDGAR Online, Inc.