Yahoo 2011 Annual Report Download - page 79

The derivative entered into by the Company has not been designated as an accounting hedge and instead is used
as an economic hedge to partially offset the foreign currency exchange gains and losses generated by the
re-measurement of a certain intercompany loan denominated in non-functional currency. The Company
recognized this derivative instrument as a liability on the Company’s consolidated balance sheets at fair value.
Changes in the fair value of this derivative is recorded in other income, net on the Company’s consolidated
statements of income. The Company’s foreign currency forward contract is not used for trading or speculative
purposes.
The notional amount of the foreign currency forward contract was $92 million as of December 31, 2011. The fair
value of the foreign currency forward contract was $3 million as of December 31, 2011 and was recorded as a
loss of $3 million for the year ended December 31, 2011. The Company did not enter into any derivative
instruments in fiscal years 2010 or 2009.
Recent Accounting Pronouncements
In June 2011, the Financial Accounting Standards Board (“FASB”) amended its guidance on the presentation of
comprehensive income. Under the amended guidance, an entity has the option to present comprehensive income
in either one continuous statement or two consecutive financial statements. A single statement must present the
components of net income and total net income, the components of other comprehensive income and total other
comprehensive income, and a total for comprehensive income. In a two-statement approach, an entity must
present the components of net income and total net income in the first statement. That statement must be
immediately followed by a financial statement that presents the components of other comprehensive income, a
total for other comprehensive income, and a total for comprehensive income. The option under the current
guidance that permits the presentation of components of other comprehensive income as part of the statement of
changes in stockholders’ equity has been eliminated. The amendment becomes effective on January 1, 2012 and
is applied retrospectively. Early adoption is permitted. This guidance will not have an impact on the Company’s
consolidated financial position, results of operations or cash flows as it is disclosure-only in nature.
In September 2011, the FASB issued a revised standard on testing for goodwill impairment. The revised standard
allows an entity to first assess qualitatively whether it is necessary to perform step one of the two-step annual
goodwill impairment test. An entity is required to perform step one only if the entity concludes that it is more
likely than not that a reporting unit’s fair value is less than its carrying amount, a likelihood of more than 50
percent. An entity can choose to perform the qualitative assessment on none, some, or all of its reporting units.
Moreover, an entity can bypass the qualitative assessment for any reporting unit in any period and proceed
directly to step one of the impairment test, and then perform the qualitative assessment in any subsequent period.
The revised standard is effective for annual and interim goodwill impairment tests performed for fiscal years
beginning after December 15, 2011 and early adoption is permitted. The Company does not believe this guidance
will have any impact on its consolidated financial position, results of operations, or cash flows.
Note 2 B ASIC A ND D ILUTED N ET I NCOME A TTRIBUTABLE T O Y AHOO !C OMMON S TOCKHOLDERS P ER
S HARE
Basic and diluted net income attributable to Yahoo! common stockholders per share is computed using the
weighted average number of common shares outstanding during the period, excluding net income attributable to
participating securities (restricted stock awards granted under the Company’s 1995 Stock Plan and restricted
stock units granted under the 1996 Directors’ Stock Plan (the “Directors’ Plan”)). 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 are calculated using the treasury stock method and
consist of unvested restricted stock and shares underlying unvested restricted stock units, the incremental
common shares issuable upon the exercise of stock options, and shares to be purchased under the 1996 Employee
Stock Purchase Plan, as amended and restated in June 2009 (the “Employee Stock Purchase Plan”). The
Company calculates potential tax windfalls and shortfalls by including the impact of pro forma deferred tax
assets.
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