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Anthropic, PBC
Notes to Consolidated Financial Statements
(Continued)

requisite service period using the accelerated attribution method, if it is probable that the performance-based 
vesting condition will be satisfied. The performance-based vesting condition will be deemed probable of being 
satisfied upon either the consummation of an acquisition or change in control or the Company’s initial public 
offering. As of December 31, 2025 and June 30, 2026 (unaudited), no stock-based compensation expense had 
been  recognized  for  the  RSUs  because  management  determined  that  it  is  not  probable  that  the  performance 
condition will be achieved.

Redeemable Convertible Preferred Stock

The  Company  records  shares  of redeemable  convertible  preferred  stock  at  their  respective  fair  values  on  the 
dates  of  issuance,  net  of  issuance  costs.  The redeemable  convertible  preferred  stock  is  recorded  outside  of 
permanent equity because it is not mandatorily redeemable and redemption is contingent upon the occurrence 
of  certain  deemed  liquidation  events  that  are  not  solely  within  the  Company’s  control.  The  Company  has  not 
adjusted the carrying values of the redeemable convertible preferred stock to the liquidation preferences of such 
shares because it is not probable that a deemed liquidation event would occur that would obligate the Company 
to  pay  the  liquidation  preferences  to  holders  of  shares  of redeemable convertible preferred stock. Subsequent 
adjustments of the carrying values to the liquidation preferences will be made only when it becomes probable 
that such a deemed liquidation event will occur.

Foreign Currency

The  functional  currencies  of  the  Company’s  foreign  subsidiaries  are  the  local  currency  or  the  U.S.  dollar 
depending  on  the  nature  of  the  subsidiaries’  activities.  Monetary  assets  and  liabilities,  and  transactions 
denominated in currencies other than the functional currency are remeasured to the functional currency at the 
exchange rate in effect at the end of the period and are recorded in the current period consolidated statements 
of operations. Gains and losses resulting from remeasurement are recorded in foreign exchange gains (losses), 
net  within  other  income  (expense),  net  in  the  consolidated  statements  of  operations.  Subsidiary  assets  and 
liabilities with non-U.S. dollar functional currencies are translated at the month-end rate, retained earnings and 
other  equity  items  are  translated  at  historical  rates,  and  revenue  and  expenses  are  translated  at  average 
exchange  rates  during  the  year.  Cumulative  translation  adjustments  are  recorded  within  accumulated  other 
comprehensive income (loss), a separate component of total stockholders’ deficit in the Company’s consolidated 
balance sheets.

Loss Contingencies

The  Company  is  periodically  involved  in  various  legal  claims,  proceedings  and  other  regulatory  and 
administrative  proceedings  that  may  arise  in  the  ordinary  course  of  business.  Certain  of  these  matters  may 
include  speculative  claims  for  substantial  or  indeterminate  amounts  of  damages.  The  Company  routinely 
reviews the status of each significant matter and assesses its potential financial exposure. The Company records 
a  liability  when  it  believes  that  it  is  both  probable  that  a  loss  has  been  incurred  and  the  amount  can  be 
reasonably estimated. If the Company determines that a loss is reasonably possible and the loss or range of loss 
can be reasonably estimated, the Company discloses the possible loss in the consolidated financial statements.

Because of inherent uncertainties related to these legal matters, significant judgment is required to determine 
both  the  probability  and  the  estimated  amount  of  loss.  These  estimates  have  been  based  on  the  Company’s 
assessment of the facts and circumstances at each balance sheet date and are subject to change based on new 
information  and  future  events.  As  additional  information  becomes  available,  the  Company  reassesses  its 
potential  liability  and  may revise its estimates. If one or more matters were resolved against the Company for 
amounts in excess of management’s expectations, the Company’s results of operations and financial condition, 
including in a particular reporting period in which any such outcome becomes probable and estimable, could be 
materially adversely affected.

Share Repurchase

Share  repurchases  are  recorded  on  the  trade  date.  When  shares  are  immediately  retired,  the  value  of 
repurchased shares is deducted from stockholders’ deficit through common stock with the excess over par value 
recorded to accumulated deficit.

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