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(Dollar and Share Amounts in Thousands except Per Share Information and as Otherwise Noted) 

## Summary of Significant Accounting Policies, continued 

## Income Taxes 

The Company accounts for income taxes under the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. 

## Comprehensive Income 

The Company complies with the provisions of SFAS No. 130, Reporting Comprehensive Income , which establishes standards for the reporting of comprehensive income and its components. The components of comprehensive income are as follows: 

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## Earnings Per Share 

Basic net earnings per share is calculated using net earnings available to common stockholders divided by the weighted average number of shares of Common Stock outstanding during the year. Diluted net earnings per share is similar to basic net earnings per share except that the weighted average number of shares of Common Stock outstanding plus the assumed issuance of contingent shares is increased to include the number of additional shares of Common Stock that would have been outstanding assuming the issuance of all potentially dilutive shares, such as Common Stock to be issued upon exercise of options. The following table presents a reconciliation of the denominators used in the computation of basic and diluted earnings per share related to the Fastenal Option Plan: 

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## Segment Reporting 

The Company has reviewed SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information , and determined the Company meets the aggregation criteria outlined as the various operations of the Company have similar (1) economic characteristics, (2) products and services, (3) customers, (4) distribution channels, and (5) regulatory environments. Therefore the Company reports as a single business segment. 

