eBay 2006 Annual Report Download - page 87

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measured as of the employer’s balance sheet date. The measurement provision of this statement will be effective for
years beginning after December 15, 2008 with early adoption encouraged. We have not yet adopted the
measurement date provisions of this statement.
In 2006, we adopted Staff Accounting Bulletin No. 108, “Considering the Effects of Prior Year Misstatements
When Quantifying Misstatements in Current Year Financial Statements” (SAB 108), which provides interpretive
guidance on how the effects of the carryover or reversal of prior year misstatements should be considered in
quantifying a current year misstatement. The adoption of SAB 108 did not impact our consolidated financial
statements.
Note 2 — Net Income Per Share:
Basic net income per share is computed by dividing the net income for the period by the weighted average
number of common shares outstanding during the period. Diluted net income per share is computed by dividing the
net income for the period by the weighted average number of shares of common stock and potentially dilutive
common stock outstanding during the period. The dilutive effect of outstanding options, restricted stock units and
nonvested stock is reflected in diluted earnings per share by application of the treasury stock method, which in 2006
includes consideration of stock-based compensation required by FAS 123(R). The following table sets forth the
computation of basic and diluted net income per share for the periods indicated (in thousands, except per share
amounts):
2004 2005 2006
Year Ended December 31,
Numerator:
Net income ................................. $ 778,223 $1,082,043 $1,125,639
Denominator:
Weighted average common shares . . . .............. 1,319,548 1,361,748 1,403,455
Weighted average unvested common stock subject to
repurchase ................................ (90) (40) (4,204)
Denominator for basic calculation . .............. 1,319,458 1,361,708 1,399,251
Weighted average effect of dilutive securities:
Weighted average unvested common stock subject to
repurchase ................................ 90 40 4,204
Employee stock options ........................ 48,172 32,127 22,017
Denominator for diluted calculation.............. 1,367,720 1,393,875 1,425,472
Net income per share:
Basic ...................................... $ 0.59 $ 0.79 $ 0.80
Diluted .................................... $ 0.57 $ 0.78 $ 0.79
The calculation of diluted income per share excludes all anti-dilutive shares. For the years ended December 31,
2004, 2005 and 2006, the number of anti-dilutive shares, as calculated based on the weighted average closing price
of our common stock for the period, amounted to approximately 3.4 million, 26.7 million and 73.7 million shares,
respectively.
83
eBay Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)