Yahoo 2007 Annual Report Download - page 73

Foreign Currency. The functional currency of the Company’s international subsidiaries is generally the local
currency. The financial statements of these subsidiaries are translated into United States dollars using period-end
rates of exchange for assets and liabilities and average rates of exchange for the period for revenues and expenses.
Translation gains (losses) are recorded in accumulated other comprehensive income (loss) as a component of
stockholders’ equity. The Company recorded foreign currency transaction gains and losses, realized and unrealized
in other income, net on the consolidated statements of income, of approximately $8 million of net losses in 2005 and
net gains of $5 million and $7 million in 2006 and 2007, respectively.
Recent Accounting Pronouncements
In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS 157”), which defines fair
value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands
disclosures about fair value measurements. SFAS 157 does not require any new fair value measurements, but
provides guidance on how to measure fair value by providing a fair value hierarchy used to classify the source of the
information. SFAS 157 is effective for fiscal years beginning after November 15, 2007. However, on February 12,
2008, the FASB issued FSP FAS 157-2 which delays the effective date of SFAS 157 for all nonfinancial assets and
nonfinancial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a
recurring basis (at least annually). This FSP partially defers the effective date of SFAS 157 to fiscal years beginning
after November 15, 2008, and interim periods within those fiscal years for items within the scope of this FSP.
Effective for 2008, the Company will adopt SFAS 157 except as it applies to those nonfinancial assets and
nonfinancial liabilities as noted in FSP FAS 157-2. The partial adoption of SFAS 157 is not expected to have a
material impact on the Company’s consolidated financial position, cash flows, or results of operations.
In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial
Liabilities” (“SFAS 159”) which permits entities to choose to measure many financial instruments and certain other
items at fair value that are not currently required to be measured at fair value. The provisions of SFAS 159 became
effective for the Company on January 1, 2008. The adoption of SFAS 159 is not expected to have a material impact
on the Company’s consolidated financial position, cash flows, or results of operations.
In December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business Combinations” (“SFAS 141R”) and
SFAS No. 160, “Accounting and Reporting of Noncontrolling Interest in Consolidated Financial Statements, an
amendment of ARB 51” (“SFAS 160”), which will change the accounting for and reporting of business combination
transactions and noncontrolling interests in consolidated financial statements. SFAS 141R and SFAS 160 will be
effective for the Company on January 1, 2009. The Company is currently evaluating the impact of adopting
SFAS 141R and SFAS 160 on its consolidated financial position, cash flows, and results of operations.
Note 2 BASIC AND DILUTED NET INCOME PER SHARE
Basic net income per share is computed using the weighted average number of common shares outstanding during
the period, excluding any unvested restricted stock that is subject to repurchase. Diluted net income per share is
computed using the weighted average number of common shares and, if dilutive, potential common shares
outstanding during the period. Potential common shares consist of unvested restricted stock and restricted stock
units, collectively referred to as “restricted stock awards” (using the treasury stock method), the incremental
common shares issuable upon the exercise of stock options (using the treasury stock method) and the conversion of
the Company’s zero coupon senior convertible notes (using the if-converted method). For 2005, 2006, and 2007,
potentially dilutive securities representing approximately 55 million, 108 million, and 128 million shares of
common stock, respectively, were excluded from the computation of diluted earnings per share for these periods
because their effect would have been antidilutive. Potentially dilutive securities include outstanding stock options,
shares to be issued under the employee stock purchase plan, and restricted stock awards. See Note 9 — “Short-
Term Debt” for additional information related to the Company’s zero coupon senior convertible notes.
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Yahoo! Inc.
Notes to Consolidated Financial Statements — (Continued)