2007 Annual Report - Ameristar Casinos, Inc.

Income taxesIncome taxes are recorded in accordance with SFAS No. 109, “Accounting for Income Taxes.” SFAS No. 109requires recognition of deferred income tax assets and liabilities for the future tax consequences attributable todifferences between the financial statement carrying amounts of existing assets and liabilities and their respectiveincome tax bases. Deferred income tax assets and liabilities are measured using enacted tax rates expected to applyto taxable income in the years in which those temporary differences are expected to be recovered or settled.Stock splitOn April 29, 2005, the Company’s Board of Directors declared a 2-for-1 split of the Company’s $0.01 par valuecommon stock, which was distributed at the close of business on June 20, 2005. As a result of the split, 27.9 millionadditional shares were issued. Stockholders’ equity was restated to give retroactive recognition to the stock split forall periods presented by reclassifying the par value of the additional shares arising from the split from paid-in capitalto common stock. All references in the financial statements and notes to numbers of shares and per share amountsreflect the stock split.Earnings per shareThe Company calculates earnings per share in accordance with SFAS No. 128, “Earnings Per Share.” Basicearnings per share are computed by dividing reported earnings by the weighted average number of common sharesoutstanding during the period. Diluted earnings per share reflect the additional dilution from all potentially dilutivesecurities such as stock options. For 2007, 2006 and 2005, all outstanding options with an exercise price lower thanthe market price have been included in the calculation of diluted earnings per share.The weighted-average number of shares of common stock and common stock equivalents used in thecomputation of basic and diluted earnings per share consisted of the following:Years ended December 31,2007 2006 2005(Amounts in Thousands)Weighted-average number of shares outstanding-basic earnings per share................ 57,052 56,155 55,664Dilutive effect of stock options................................................................................... 1,270 1,172 1,463Weighted-average number of shares outstanding-diluted earnings per share............. 58,322 57,327 57,127For the years ended December 31, 2007, 2006 and 2005, the potentially dilutive stock options excluded from theearnings per share computation, as their effect would be anti-dilutive, totaled 1.3 million, 1.4 million and 0.1million, respectively.Accounting for stock-based compensationEffective January 1, 2006, the Company adopted the provisions of SFAS No. 123(R), “Share-Based Payment,”requiring that compensation cost relating to share-based payment transactions be recognized in the financialstatements. The cost is measured at the grant date, based on the calculated fair value of the award, and is recognizedas an expense over the employee’s requisite service period (generally the vesting period of the equity award). Priorto January 1, 2006, the Company accounted for share-based compensation to employees in accordance withAccounting Principles Board Opinion (“APB”) No. 25 and related interpretations. The Company also followed thedisclosure requirements of SFAS No. 123, as amended by SFAS No. 148, “Accounting for Stock-BasedCompensation-Transition and Disclosure.” The Company adopted SFAS No. 123(R) using the modified prospectivemethod and, accordingly, the financial statement amounts presented in this Annual Report for the year endedDecember 31, 2005 have not been restated to reflect the fair value method of recognizing compensation cost relatingto stock options.Recently issued accounting pronouncementsIn December 2007, the FASB issued SFAS No. 141 (Revised 2007), “Business Combinations” (“SFAS No.141(R)”). SFAS No. 141(R) will significantly change the accounting for business combinations. Under SFAS No.141(R), an acquiring entity will be required to recognize all the assets acquired and liabilities assumed in atransaction at the acquisition-date fair value with limited exceptions. SFAS No. 141(R) will change the accountingF-11