Notes to Consolidated Financial Statements (1) Operations and Significant Accounting Policies Forrester Research, Inc. (Forrester) is a leading independent emerging-technology research firm that conducts research and analysis on the impact of emerging technologies on business, consumers, and society. Forrester is incorporated under the laws of the State of Delaware and grants credit to its customers with locations throughout the world. The accompanying consolidated financial statements reflect the application of certain significant accounting policies as described below and elsewhere in the accompanying financial statements and notes. Principles of Consolidation. The accompanying financial statements include the accounts of  Forrester and its wholly owned subsidiaries. All significant intercompany balances have been eliminated  in consolidation. Foreign Currency. The functional currencies of Forrester’s wholly owned subsidiaries are the respective local currencies. The financial statements of the subsidiaries are translated to US dollars using period-end exchange rates for assets and liabilities and average exchange rates during the corresponding period for revenues and expenses. Translation gains and losses as a result of this translation are accumulated as a component of accumulated other comprehensive loss. Net gains and losses resulting from foreign exchange transactions are included in the consolidated statements of operations and were not significant during the periods presented. Net Income Per Common Share. Basic net income per common share is computed by dividing net income by the basic weighted average number of common shares outstanding during the period. Diluted net income per common share is computed by dividing net income by the diluted weighted average number of common and common equivalent shares outstanding during the period. The weighted average number of common equivalent shares outstanding has been determined in accordance with the treasury-stock method. Common stock equivalents consist of common stock issuable upon the exercise of outstanding stock options. Basic and diluted weighted average common shares are as follows (in thousands): As of December 31, 1998, 1999, and 2000, approximately 880,000, 672,000, and 442,000 options, respectively, were outstanding but not included in the diluted weighted average common share calculation as the effect would have been anti-dilutive. Revenue Recognition. Forrester generally invoices its core research, advisory, and other services when an order is received. The contract amount is recorded as accounts receivable and deferred revenue  when the client is invoiced. Core research is recorded as revenue ratably over the term of the agreement. Advisory and other services are recognized during the period in which the services are performed. Forrester Research | Annual Report 2000 f-18 | 19 1998 1999 2000 Basic weighted average common  shares outstanding 17,041 18,028 20,989 Weighted average common equivalent shares 1,703 2,039 3,537 Diluted weighted average common  shares outstanding 18,744 20,067 24,526