
	~~10.16†~~
10.19†		Form of Director Offer Letter (incorporated herein by reference to Exhibit 10.18 to Amendment No. 6)
	~~10.17†~~10.20†		Executive Employment Agreement by and between Arkadiy Dobkin and EPAM Systems, Inc. dated January 20, 2006 (expired except with respect to Section 8) (incorporated herein by reference to Exhibit 10.19 to Amendment No. 6)
	~~10.18†~~10.21†		Offer Letter by and between Ginger Mosier and EPAM Systems, Inc. dated February 24, 2010 (incorporated herein by reference to Exhibit 10.20 to Amendment No. 6)
	~~10.19†~~10.22†		Employment Contract by and between Balazs Fejes and EPAM Systems (Switzerland) GmbH. dated June 15, 2009 (incorporated herein by reference to Exhibit 10.21 to Amendment No. 6)
	~~10.20†~~10.23†		Consultancy Agreement by and between Landmark Business Development Limited, Balazs Fejes and EPAM Systems, Inc. dated January 20, 2006 (expired except with respect to Section 8) (incorporated herein by reference to Exhibit 10.22 to Amendment No. 6)
	~~10.21†~~10.24†		Consultancy Agreement by and between Landmark Business Development Limited, Karl Robb and EPAM Systems, Inc. dated January 20, 2006 (expired except with respect to Section 8) (incorporated herein by reference to Exhibit 10.23 to Amendment No. 6)
	~~10.22†~~10.25†		Form of nondisclosure, noncompete and nonsolicitation agreement (incorporated herein by reference to Exhibit 10.24 to Amendment No. 6)
	~~10.23†~~10.26†		Form of Indemnification Agreement (incorporated herein by reference to Exhibit 10.25 to Amendment No. 6)

~~Table of Contents~~

	~~Exhibit Number~~			~~Description~~
	~~10.24~~			~~English translation of Agreement with IDEAB Project Eesti AS (incorporated herein by reference to Exhibit 10.26 to Amendment No. 6)~~
	~~10.25~~10.27			Credit Agreement dated as of September 12, 2014 by and among EPAM Systems, Inc. (as borrower), ~~as Borrower, The Guarantors Parties Hereto,~~the lenders and guarantors party thereto, and PNC Bank, National Association, as ~~Lender dated January 15, 2013~~Administrative Agent (incorporated ~~herein~~hereby by reference to Exhibit ~~10.25~~10.1 to the Company’s Current Report on Form ~~10-K for the fiscal year ended December 31, 2012,~~8-K filed September 9, 2014, SEC File No. ~~001-35418, filed March 11, 2013 (the “2012 Form 10-K”))~~001-35418)
	~~10.26~~10.28†*			~~Guaranty~~ Offer Letter by and ~~Suretyship Agreement~~ between ~~EPAM Systems LLC, a New Jersey limited liability company,~~Boris Shnayder and ~~Vested Development, Inc., a Delaware corporation, and PNC Bank, National Association dated January 15, 2013 (incorporated herein by reference to Exhibit 10.26 to the 2012 Form 10-K)~~
	~~10.27~~			Security Agreement between EPAM Systems, Inc., a Delaware corporation, EPAM Systems LLC, a New Jersey limited liability company, and Vested Development, Inc., a Delaware corporation, and PNC Bank, National Association dated January 15, 2013 (incorporated herein by reference to Exhibit 10.27 to the 2012 Form 10-K)
	~~10.28~~			~~Pledge Agreement to loan documents between~~ EPAM Systems, Inc. ~~a Delaware corporation,~~dated June 20, 2015
10.29†*		Amended Non-Employee Director Compensation Policy
10.30†*		Transition Agreement by and between Anthony Conte and EPAM Systems, ~~LLC, a New Jersey limited liability company, and Vested Development,~~ Inc.~~, a Delaware corporation, and PNC Bank, National Association~~ dated ~~January 15, 2013 (incorporated herein by reference to Exhibit 10.28 to the 2012 Form 10-K)~~February 23, 2017
21.1*	18.1*		~~Letter re Changes in Accounting Principles~~
	21.1*			Subsidiaries of the Registrant
23.1*	23.1*		Consent of Independent Registered Public Accounting Firm
31.1*	31.1*		Certification of the Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934
31.2*	31.2*		Certification of the Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934
32.1*	32.1*		Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2*	32.2*		Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
	101.INS**		XBRL Instance Document
	101.SCH**		XBRL Taxonomy Extension Schema Document
	101.CAL**		XBRL Taxonomy Extension Calculation Linkbase Document
	101.DEF**			XBRL Taxonomy Extension Definition Linkbase Document
	101.LAB**			XBRL Taxonomy Extension Label Linkbase Document
	101.PRE**		XBRL Taxonomy Extension Presentation Linkbase Document

†	†	Indicates management contracts or compensatory plans or arrangements
*	*	Exhibits filed herewith
**	**	As provided in Rule 406T of Regulation S-T, this information is furnished and not filed for purposes of Section 11 and 12 of the Securities Act of 1933, as amended, and Section 18 of the Securities Exchange Act of 1934, as amended.

~~Table of Contents~~

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: February 28, 2017



	EPAM SYSTEMS, INC.

	By:	/s/ Arkadiy Dobkin
		Name: Arkadiy Dobkin
		Title: Chairman, Chief Executive Officer and President (principal executive officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.



Signature	Title	Date

/s/ Arkadiy Dobkin	Chairman, Chief Executive Officer and President (principal executive officer)	February 28, 2017
Arkadiy Dobkin		February 28, 2017

/s/ Anthony J. Conte	Senior Vice President, Chief Financial Officer and Treasurer (principal financial officer and principal accounting officer)	February 28, 2017
Anthony J. Conte		February 28, 2017

/s/ Jill B. Smart	Director	February 28, 2017
Jill B. Smart		February 28, 2017


/s/ Karl Robb	Director	February 28, 2017
Karl Robb		February 28, 2017


/s/ Peter Kuerpick	Director	February 28, 2017
Peter Kuerpick		February 28, 2017


/s/ Richard Michael Mayoras	Director	February 28, 2017
Richard Michael Mayoras		February 28, 2017


/s/ Robert E. Segert	Director	February 28, 2017
Robert E. Segert		February 28, 2017


/s/ Ronald P. Vargo	Director	February 28, 2017
Ronald P. Vargo		February 28, 2017

EPAM SYSTEMS, INC.

FORM 10-K

FOR THE YEAR ENDED DECEMBER 31, 2016

TABLE OF CONTENTS

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS



	Page
Audited Consolidated Financial Statements
~~Report~~Reports of Independent Registered Public Accounting Firm	F-2
Consolidated Balance Sheets as of December 31, ~~2013~~2016 and ~~2012~~2015	~~F-3~~F-4
Consolidated Statements of Income and Comprehensive Income for Years Ended December 31, ~~2013, 2012~~2016, 2015 and ~~2011~~2014	~~F-4~~F-5
Consolidated Statements of Changes in ~~Redeemable Preferred Stock and~~ Stockholders’ Equity for Years Ended December 31, ~~2013, 2012~~2016, 2015 and ~~2011~~2014	~~F-5~~F-6
Consolidated Statements of Cash Flows for Years Ended December 31, ~~2013, 2012~~2016, 2015 and ~~2011~~2014	~~F-7~~F-8
Notes to Consolidated Financial Statements for Years Ended December 31, ~~2013, 2012~~2016, 2015 and ~~2011~~2014	~~F-8~~F-10

Financial Statements Schedule:
Schedule II - Valuation and Qualifying Accounts	F-43

~~F-1~~

~~Table of Contents~~

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

EPAM Systems, Inc.

~~Newtown, PA~~

We have audited the accompanying consolidated balance sheets of EPAM Systems, Inc. and subsidiaries (the ~~“Company”~~"Company") as of December 31, ~~2013~~2016 and ~~2012,~~2015, and the related consolidated statements of income and comprehensive income, ~~changes in redeemable preferred stock and stockholders’~~stockholders' equity, and cash flows for each of the three years in the period ended December 31, ~~2013.~~2016. Our audits also included the financial statement schedule listed in the Index at Item 15. These financial statements and financial statement schedule are the responsibility of the ~~Company’s~~Company's management. Our responsibility is to express an opinion on ~~these~~the financial statements and financial statement schedules based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit ~~also~~ includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial ~~statements,~~statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of EPAM Systems, Inc. and subsidiaries as of December 31, ~~2013~~2016 and ~~2012,~~2015, and the results of their operations and their cash flows for each of the three years in the period ended December 31, ~~2013,~~2016, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements and financial statement schedule taken as a whole, present fairly, in all material respects, the information set forth therein.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company's internal control over financial reporting as of December 31, 2016, based on the criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 28, 2017 expressed an unqualified opinion on the Company's internal control over financial reporting.

/s/ DELOITTE & TOUCHE LLP

~~Philadelphia, PA~~

~~March 10, 2014~~

~~F-2~~

~~Table of Contents~~

Philadelphia, Pennsylvania

February 28, 2017

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of EPAM Systems, Inc.

We have audited the internal control over financial reporting of EPAM Systems, Inc. and subsidiaries (the "Company") as of December 31, 2016, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company's internal control over financial reporting is a process designed by, or under the supervision of, the company's principal executive and principal financial officers, or persons performing similar functions, and effected by the company's board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2016, based on the criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements and financial statement schedule as of and for the year ended December 31, 2016 of the Company and our report dated February 28, 2017 expressed an unqualified opinion on those financial statements and financial statement schedule.

DELOITTE & TOUCHE LLP

Philadelphia, Pennsylvania

February 28, 2017

EPAM SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(US Dollars in thousands, except share and per share data)

As of
December 31, 2013

As of
December 31, 2012
Assets

Current assets

Cash and cash equivalents $ 169,207 $ 118,112
Accounts receivable, net of allowance of $1,800 and $2,203 respectively 95,431 78,906
Unbilled revenues 43,108 33,414
Prepaid and other current assets 14,355 11,835
Employee loans, net of allowance for loan losses of $0 and $0, respectively, current 1,989 429
Time deposits 1,188 1,006
Restricted cash, current 298 660
Deferred tax assets, current 5,392 6,593
Total current assets 330,968 250,955
Property and equipment, net 53,315 53,135
Restricted cash, long-term 225 467
Employee loans, net of allowance for loan losses of $0 and $0, respectively, long-term 4,401 —
Intangible assets, net 13,734 16,834
Goodwill 22,268 22,698
Deferred tax assets, long-term 4,557 6,093
Other long-term assets 3,409 632
Total assets $ 432,877 $ 350,814

Liabilities
Current liabilities
Accounts payable $ 2,835 $ 6,095
Accrued expenses and other liabilities 20,175 19,814
Deferred revenues, current 4,543 6,369
Due to employees 12,665 12,026
Taxes payable 14,171 14,557
Deferred tax liabilities, current 275 491
Total current liabilities 54,664 59,352
Deferred revenues, long-term 533 1,263
Taxes payable, long-term 1,228 1,228
Deferred tax liabilities, long-term 351 2,691
Total liabilities 56,776 64,534
Commitments and contingencies (See Note 16)

Stockholders’ equity
Common stock, $0.001 par value; 160,000,000 authorized; 47,569,463 and 45,398,523 shares issued, 46,614,916 and 44,442,494 shares outstanding at December 31, 2013 and December 31, 2012, respectively 46 44
Additional paid-in capital 195,585 166,962
Retained earnings 190,986 128,992
Treasury stock (8,684 ) (8,697 )
Accumulated other comprehensive loss (1,832 ) (1,021 )
Total stockholders’ equity 376,101 286,280
Total liabilities and stockholders’ equity $ 432,877 $ 350,814



	As of December 31, 2016			As of December 31, 2015
Assets
Current assets
Cash and cash equivalents	$	362,025		$	199,449
Restricted cash	2,400			—
Time deposits	403			30,181
Accounts receivable, net of allowance of $1,434 and $1,729, respectively	199,982			174,617
Unbilled revenues	63,325			95,808
Prepaid and other assets, net of allowance of $644 and $0, respectively	15,690			14,344
Employee loans, net of allowance of $0 and $0, respectively	2,726			2,689
Deferred tax assets	—			11,847
Total current assets	646,551			528,935
Property and equipment, net	73,616			60,499
Restricted cash	239			238
Employee loans, net of allowance of $0 and $0, respectively	3,252			3,649
Intangible assets, net	51,260			46,860
Goodwill	109,289			115,930
Deferred tax assets	31,005			18,312
Other long-term assets, net of allowance of $132 and $0, respectively	10,599			4,113
Total assets	$	925,811		$	778,536

Liabilities
Current liabilities
Accounts payable	$	3,213		$	2,576
Accrued expenses and other liabilities	49,895			63,796
Due to employees	32,203			26,703
Deferred compensation due to employees	5,900			5,364
Taxes payable	25,008			29,472
Total current liabilities	116,219			127,911
Long-term debt	25,048			35,000
Other long-term liabilities	3,132			2,402
Total liabilities	144,399			165,313
Commitments and contingencies (Note 16)
Stockholders’ equity
Common stock, $0.001 par value; 160,000,000 authorized; 51,117,422 and 50,177,044 shares issued, 51,097,687 and 50,166,537 shares outstanding at December 31, 2016 and December 31, 2015, respectively	50			49
Additional paid-in capital	374,907			303,363
Retained earnings	444,320			345,054
Treasury stock	(177		)	(93		)
Accumulated other comprehensive loss	(37,688		)	(35,150		)
Total stockholders’ equity	781,412			613,223
Total liabilities and stockholders’ equity	$	925,811		$	778,536

The accompanying notes are an integral part of the consolidated financial ~~statements~~statements.

~~F-3~~

~~Table of Contents~~

EPAM SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(US Dollars in thousands, except share and per share data)



	For the Years Ended December 31,
	2016			2015			2014
Revenues	$	1,160,132		$	914,128		$	730,027
Operating expenses:
Cost of revenues (exclusive of depreciation and amortization)	737,186			566,913			456,530
Selling, general and administrative expenses	264,658			222,759			163,666
Depreciation and amortization expense	23,387			17,395			17,483
Goodwill impairment loss	—			—			2,241
Other operating expenses, net	1,205			1,094			3,924
Income from operations	133,696			105,967			86,183
Interest and other income, net	4,848			4,731			4,769
Change in fair value of contingent consideration	—			—			(1,924		)
Foreign exchange loss	(12,078		)	(4,628		)	(2,075		)
Income before provision for income taxes	126,466			106,070			86,953
Provision for income taxes	27,200			21,614			17,312
Net income	$	99,266		$	84,456		$	69,641
Foreign currency translation adjustments	(2,538		)	(13,096		)	(20,251		)
Comprehensive income	$	96,728		$	71,360		$	49,390

Net income per share:
Basic	$	1.97		$	1.73		$	1.48
Diluted	$	1.87		$	1.62		$	1.40
Shares used in calculation of net income per share:
Basic	50,309			48,721			47,189
Diluted	53,215			51,986			49,734

For the Years Ended December 31,

2013 2012 2011
Revenues $ 555,117 $ 433,799 $ 334,528
Operating expenses:
Cost of revenues (exclusive of depreciation and amortization) 347,650 270,361 205,336
Selling, general and administrative expenses 116,497 85,868 64,930
Depreciation and amortization expense 15,120 10,882 7,538
Goodwill impairment loss — — 1,697
Other operating (income)/ expenses, net (643 ) 682 19
Income from operations 76,493 66,006 55,008
Interest and other income, net 3,077 1,941 1,422
Foreign exchange loss (2,800 ) (2,084 ) (3,638 )
Income before provision for income taxes 76,770 65,863 52,792
Provision for income taxes 14,776 11,379 8,439
Net income $ 61,994 $ 54,484 $ 44,353
Cumulative translation adjustment (811 ) 2,493 (1,250 )
Comprehensive income $ 61,183 $ 56,977 $ 43,103
Accretion of preferred stock — — (17,563 )
Net income allocated to participating securities — (3,341 ) (15,025 )
Net income available for common stockholders $ 61,994 $ 51,143 $ 11,765

Net income per share of common stock:
Basic (common) $ 1.35 $ 1.27 $ 0.69
Basic (puttable common) $ — $ — $ 1.42
Diluted (common) $ 1.28 $ 1.17 $ 0.63
Diluted (puttable common) $ — $ — $ 0.77
Shares used in calculation of net income per share of common stock:
Basic (common) 45,754 40,190 17,094
Basic (puttable common) — — 18
Diluted (common) 48,358 43,821 20,473
Diluted (puttable common) — — 18

The accompanying notes are an integral part of the consolidated financial ~~statements~~statements.

~~F-4~~

~~Table of Contents~~

~~EPAM SYSTEMS, INC. AND SUBSIDIARIES~~

~~CONSOLIDATED STATEMENTS OF CHANGES IN~~

~~REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY~~

For the Years Ended December 31, 2013, 2012 and 2011
(US Dollars in thousands, except share data)

Series A-1 and A-2, Convertible Redeemable Preferred Stock
Puttable Common
Stock

Common
Stock

Series A-3 Convertible
Preferred Stock
Additional Paid-in Capital
Retained
Earnings

Treasury
Stock
Accumulated Other Comprehensive Income   Total Stockholders’ Equity
Shares Amount   Shares   Amount   Shares   Amount   Shares   Amount

Balance, December 31, 2010
2,439,739
$ 68,377 56,896 $ 332 17,054,408 $ 17 290,277 $ — $ 36,750 $ 47,718 $ (15,972 ) $ (2,264 ) $ 66,249
Accretion of A-2 preferred stock to redemption value    — 17,563 — — — — — — (17,563 ) — — (17,563 )
Stock-based compensation expense    — — — — — — — — 2,866 — — — 2,866
Proceeds from stock options exercises    — — — — 47,600 — — — 72 — — — 72
Put option expiry    — — (56,896 ) (332 ) 56,896 — — — 332 — — — 332
Currency translation adjustment    — — — — — — — — — — — (1,250 ) (1,250 )
Net income    — — — — — — — — — 44,353 — — 44,353
Balance, December 31, 2011    2,439,739 85,940 — — 17,158,904 17 290,277 — 40,020 74,508 (15,972 ) (3,514 ) 95,059
Conversion to common stock   (2,439,739 ) (85,940 ) — — 21,840,128 22 (290,277 ) — 85,918 — — — 85,940
Initial public offering of common stock    — — — — 2,900,000 3 — — 32,361 — — — 32,364
Offering issuance costs    — — — — — — — — (3,395 ) — — — (3,395 )
Issuance of restricted stock    — — — — 213,656 — — — — — — — —
Stock issued in connection with acquisition of Instant Information    — — — — 53,336 — — — 640 — — — 640
Stock issued in connection with acquisition of Thoughtcorp, Inc. (Note 2) — — — — 434,546 — — — (346 ) — 3,953 — 3,607
Stock issued in connection with acquisition of Empathy Lab, LLC (Note 2) — — — — 326,344 — — — (2,969 ) — 2,969 — —
Stock-based compensation expense    — — — — — — — — 6,826 — — — 6,826
Proceeds from stock options exercises    — — — — 1,515,580 2 — — 4,963 — — — 4,965
Treasury stock retirement    — — — — — — — — (353 ) — 353 — —
Excess tax benefits    — — — — — — — — 3,297 — — — 3,297
Currency translation adjustment    — — — — — — — — — — — 2,493 2,493
Net income    — — — — — — — — — 54,484 — — 54,484
Balance, December 31, 2012    — $ — — $ — 44,442,494 $ 44 — $ — $ 166,962 $ 128,992 $ (8,697 ) $ (1,021 ) $ 286,280

~~F-5~~

~~Table of Contents~~

EPAM SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN

~~REDEEMABLE PREFERRED STOCK AND~~ STOCKHOLDERS’ EQUITY ~~(CONT’D)~~

(US Dollars in thousands, except share data)




	Common Stock				Additional Paid-in Capital			Retained Earnings			Treasury Stock			Accumulated Other Comprehensive (Loss)/ Income			Total Stockholders’ Equity
	Shares		Amount
Balance, December 31, 2013	46,614,916		$	46	$	195,585		$	190,986		$	(8,684	)	$	(1,832	)	$	376,101
Stock issued in connection with acquisitions (Note 3)	534,534		—		(2,076		)	—			4,864			—			2,788
Forfeiture of stock issued in connection with acquisitions	(24,474	)	—		223			—			(223		)	—			—
Stock issued under the 2012 Non-Employee Directors Compensation Plan (Note 14)	7,738		—		—			—			—			—			—
Stock-based compensation expense	—		—		21,397			—			—			—			21,397
Proceeds from stock option exercises	1,171,097		2		10,596			—			—			—			10,598
Excess tax benefits	—		—		3,776			—			—			—			3,776
Prior periods retained earnings adjustment	—		—		—			(29		)	—			29			—
Foreign currency translation adjustment	—		—		—			—			—			(20,251		)	(20,251		)
Net income	—		—		—			69,641			—			—			69,641
Balance, December 31, 2014	48,303,811		$	48	$	229,501		$	260,598		$	(4,043	)	$	(22,054	)	$	464,050
Stock issued in connection with acquisitions (Note 3)	435,462		—		1,118			—			3,963			—			5,081
Forfeiture of stock issued in connection with acquisitions	(1,482	)	—		13			—			(13		)	—			—
Stock issued under the 2012 Non-Employee Directors Compensation Plan (Note 14)	5,295		—		—			—			—			—			—
Restricted stock units vested	17,625		—		574			—			—			—			574
Stock-based compensation expense	—		—		43,120			—			—			—			43,120
Proceeds from stock option exercises	1,405,826		1		20,674			—			—			—			20,675
Excess tax benefits	—		—		8,363			—			—			—			8,363
Foreign currency translation adjustment	—		—		—			—			—			(13,096		)	(13,096		)
Net income	—		—		—			84,456			—			—			84,456
Balance, December 31, 2015	50,166,537		$	49	$	303,363		$	345,054		$	(93	)	$	(35,150	)	$	613,223

For the Years Ended December 31, 2013, 2012 and 2011
(US Dollars in thousands, except share data)

Common Stock   Additional Paid-in Capital   Retained Earnings   Treasury Stock   Accumulated Other Comprehensive Income
Total Stockholders’
Equity

Shares   Amount

Balance, December 31, 2012 44,442,494 $ 44 $ 166,962 $ 128,992 $ (8,697 ) $ (1,021 ) $ 286,280
Stock issued under the 2012 Non-Employee Directors Compensation Plan (Note 14) 14,041 — — — — — —
Stock issued in connection with acquisition of Empathy Lab, LLC (Note 14) 1,483 — (13 ) — 13 — —
Stock-based compensation expense — — 13,150 — — — 13,150
Proceeds from stock options exercises 2,156,898 2 9,285 — — — 9,287
Excess tax benefits — — 6,201 — — — 6,201
Currency translation adjustment — — — — — (811 ) (811 )
Net income — — — 61,994 — — 61,994
Balance, December 31, 2013 46,614,916 $ 46 $ 195,585 $ 190,986 $ (8,684 ) $ (1,832 ) $ 376,101

~~(Concluded)~~

~~The accompanying notes are an integral part of the consolidated financial statements~~

~~F-6~~

~~Table of Contents~~

EPAM SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF ~~CASH FLOWS~~CHANGES IN

STOCKHOLDERS’ EQUITY

(Continued)

(US Dollars in ~~thousands)~~

For the Years Ended December 31,

2013 2012 2011
Cash flows from operating activities:

Net Income $ 61,994 $ 54,484 $ 44,353
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 15,120 10,882 7,538
Bad debt expense 335 662 727
Deferred taxes 41 (3,933 ) 497
Stock-based compensation expense 13,150 6,826 2,866
Excess tax benefits on stock-based compensation plans (6,201 ) (3,297 ) —
Non-cash stock charge — 640 —
Goodwill impairment loss — — 1,697
Other 1,199 (66 ) 777
Change in operating assets and liabilities (net of effects of acquisitions):
(Increase)/ decrease in operating assets:
Accounts receivable (17,302 ) (12,664 ) (19,030 )
Unbilled revenues (9,833 ) (6,905 ) (1,004 )
Prepaid expenses and other assets 587 (1,339 ) (1,694 )
Increase/ (decrease) in operating liabilities:
Accounts payable (2,900 ) 1,407 254
Accrued expenses and other liabilities 501 (5,825 ) 9,474
Deferred revenues (2,325 ) (767 ) 1,843
Due to employees 785 2,896 2,796
Taxes payable 3,074 5,498 3,426
Net cash provided by operating activities 58,225 48,499 54,520
Cash flows from investing activities:
Purchases of property and equipment (13,360 ) (13,376 ) (15,548 )
Payments for construction of corporate facilities (2,560 ) (13,701 ) (1,545 )
Issuance of employee housing loans (7,982 ) — —
Proceeds from repayments of employee housing loans 2,189 — —
Decrease/(increase) in restricted cash, net (Note 6) 429 470 (144 )
Increase in other long-term assets, net (516 ) (69 ) (171 )
Acquisition of businesses, net of cash acquired (Note 2) (20 ) (32,951 ) —
Net cash used in investing activities (21,820 ) (59,627 ) (17,408 )
Cash flows from financing activities:
Proceeds related to stock options exercises 9,300 4,951 72
Excess tax benefits on stock-based compensation plans 6,201 3,297 —
Net proceeds from issuance of common stock in initial public offering — 32,364 —
Costs related to stock issue — (1,765 ) (1,630 )
Proceeds related to line of credit — — 5,000
Repayment related to line of credit — — (5,000 )
Net cash provided by/ (used in) financing activities 15,501 38,847 (1,558 )
Effect of exchange-rate changes on cash and cash equivalents (811 ) 1,597 (762 )
Net increase in cash and cash equivalents 51,095 29,316 34,792
Cash and cash equivalents, beginning of year-January 1 118,112 88,796 54,004
Cash and cash equivalents, end of year $ 169,207 $ 118,112 $ 88,796
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Income taxes $ 10,207 $ 13,065 $ 7,007
Bank interest 26 14 37

~~Summary of non-cash investing and financing transactions:~~thousands, except share data)

~~Accretion of Series A-2 convertible redeemable preferred stock was $0 in 2013, $0 in 2012, and $17,563 in 2011.~~

~~Total incurred but not paid costs related to stock issue were $0 in 2013, $0 in 2012 and $470 in 2011.~~

~~Total incurred but not paid costs related to acquisition of businesses were $0 in 2013, and $96 in 2012 and $0 in 2011.~~




	Common Stock				Additional Paid-in Capital		Retained Earnings		Treasury Stock			Accumulated Other Comprehensive (Loss)/ Income			Total Stockholders’ Equity
	Shares		Amount
Balance, December 31, 2015	50,166,537		$	49	$	303,363	$	345,054	$	(93	)	$	(35,150	)	$	613,223
Forfeiture of stock issued in connection with acquisitions	(9,228	)	—		84		—		(84		)	—			—
Stock issued under the 2012 Non-Employee Directors Compensation Plan (Note 14)	6,510		—		—		—		—			—			—
Restricted stock units vested, net of shares withheld for taxes	38,064		—		2,069		—		—			—			2,069
Stock-based compensation expense	—		—		46,100		—		—			—			46,100
Proceeds from stock option exercises	895,804		1		18,027		—		—			—			18,028
Excess tax benefits	—		—		5,264		—		—			—			5,264
Foreign currency translation adjustment	—		—		—		—		—			(2,538		)	(2,538		)
Net income	—		—		—		99,266		—			—			99,266
Balance, December 31, 2016	51,097,687		$	50	$	374,907	$	444,320	$	(177	)	$	(37,688	)	$	781,412

The accompanying notes are an integral part of the consolidated financial statements.

~~F-7~~

~~Table of Contents~~

EPAM SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS



(US Dollars in thousands)	For the Years Ended December 31,
	2016			2015			2014
Cash flows from operating activities:
Net income	$	99,266		$	84,456		$	69,641
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	23,387			17,395			17,483
Bad debt expense	1,539			1,407			817
Deferred taxes	(3,304		)	(15,328		)	(3,270		)
Stock-based compensation expense	49,244			45,833			24,620
Impairment charges and acquisition related adjustments	—			(1,183		)	7,907
Excess tax benefit on stock-based compensation plans	(5,264		)	(8,363		)	(3,776		)
Other	6,228			3,883			735
Changes in operating assets and liabilities:
(Increase)/decrease in operating assets:
Accounts receivable	(30,612		)	(47,694		)	(30,410		)
Unbilled revenues	34,777			(38,076		)	(11,134		)
Prepaid expenses and other assets	(4,791		)	(574		)	565
Increase/(decrease) in operating liabilities:
Accounts payable	741			(2,781		)	(2,603		)
Accrued expenses and other liabilities	(13,926		)	25,694			9,978
Due to employees	5,261			2,752			7,453
Taxes payable	2,271			8,972			16,868
Net cash provided by operating activities	164,817			76,393			104,874
Cash flows used in investing activities:
Purchases of property and equipment	(29,317		)	(13,272		)	(11,916		)
Payment for construction of corporate facilities	—			(4,692		)	(3,924		)
Employee housing loans issued	(2,006		)	(2,054		)	(1,740		)
Proceeds from repayments of employee housing loans	2,177			2,249			1,793
(Increase)/decrease in restricted cash and time deposits, net	29,595			(29,944		)	1,430
Increase in other long-term assets, net	(4,327		)	(708		)	(1,479		)
Acquisition of businesses, net of cash acquired (Note 3)	(5,500		)	(76,908		)	(37,093		)
Other investing activities, net	56			(165		)	—
Net cash used in investing activities	(9,322		)	(125,494		)	(52,929		)
Cash flows from financing activities:
Proceeds related to stock option exercises	17,996			20,675			10,571
Excess tax benefit on stock-based compensation plans	5,264			8,363			3,776
Payments of withholding taxes related to net share settlements of restricted stock units	(539		)	—			—
Proceeds from debt (Note 13)	20,000			35,000			—
Repayment of debt (Note 13)	(30,129		)	—			—
Proceeds from government grants	135			—			—
Acquisition of businesses, deferred consideration (Note 3)	(2,260		)	(30,274		)	(4,000		)
Net cash provided by financing activities	10,467			33,764			10,347
Effect of exchange rate changes on cash and cash equivalents	(3,386		)	(5,748		)	(10,965		)
Net increase/(decrease) in cash and cash equivalents	162,576			(21,085		)	51,327
Cash and cash equivalents, beginning of period	199,449			220,534			169,207
Cash and cash equivalents, end of period	$	362,025		$	199,449		$	220,534

EPAM SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Continued)



(US Dollars in thousands)	For the Years Ended December 31,
	2016		2015		2014
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Income taxes	$	37,488	$	25,071	$	11,756
Bank interest	$	566	$	124	$	7
Supplemental disclosure of non-cash operating activities
Goodwill impairment loss	$	—	$	—	$	2,241
Contingent consideration fair value adjustment	$	—	$	—	$	1,924
Write off related to the construction of a building in Minsk, Belarus	$	—	$	—	$	3,742
Prepaid and other current assets write-off related to vendor advance	$	—	$	741	$	—
Supplemental disclosure of non-cash investing and financing activities
Deferred consideration payable	$	—	$	603	$	1,022
Contingent consideration payable	$	—	$	—	$	36,322

The accompanying notes are an integral part of the consolidated financial statements.

EPAM SYSTEMS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, ~~2013~~2016 AND ~~2012~~2015

AND FOR THE YEARS ENDED DECEMBER 31, ~~2013, 2012~~2016, 2015 AND ~~2011~~2014

(US Dollars inthousands, except share and per share data)


1.	NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

EPAM ~~Systems, Inc. (the “Company” or “EPAM”)~~ is a leading global provider of complex software engineering solutions and a leader in Central and Eastern European IT services delivery. The Company provides these solutions primarily to Fortune Global 2000 companies in multiple verticals, including Independent Software Vendors (“ISVs”) and Technology, Banking and Financial services, Business Information and Media, and Travel and Consumer.

~~Since EPAM’s inception in 1993, the Company has focused on providing~~ software product development and digital platform engineering services to clients located around the world, primarily in North America, Europe, Asia and Australia. The Company has expertise in various industries, including software ~~engineering~~ and vertically-oriented custom development solutions through its global delivery model. This has served as a foundation for the Company’s other solutions, including custom application development, application testing, platform-based solutions, application maintenancehi-tech, financial services, media and ~~support,~~entertainment, travel and ~~infrastructure management.~~

hospitality, retail and distribution and life sciences and healthcare. The Company is incorporated in Delaware with headquarters in Newtown, PA, with multiple delivery centers located in Belarus, Ukraine, Russia, Hungary, Kazakhstan and Poland, and client management locations in the United States, Canada, the United Kingdom, Germany, Sweden, Switzerland, Netherlands, Russia, Kazakhstan, Singapore, Hong Kong and Australia.

~~Emerging growth company status~~ — In April 2012, several weeks after EPAM’s initial public offering in February 2012, President Obama signed into law the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). The JOBS Act contains provisions that relax certain requirements for “emerging growth companies” that otherwise apply to larger public companies. For as long as a company retains emerging growth company status, which may be until the fiscal year-end after the fifth anniversary of its initial public offering, it will not be required to (1) provide an auditor’s attestation report on its management’s assessment of the effectiveness of its internal control over financial reporting, otherwise required by Section 404(b) of the Sarbanes-Oxley Act of 2002, (2) comply with any new or revised financial accounting standard applicable to public companies until such standard is also applicable to private companies, (3) comply with certain new requirements adopted by the Public Company Accounting Oversight Board, (4) provide certain disclosure regarding executive compensation required of larger public companies or (5) hold shareholder advisory votes on matters relating to executive compensation.

EPAM is classified as an emerging growth company under the JOBS Act and is eligible to take advantage of the accommodations described above for as long as it retains this status. However, EPAM has elected not to take advantage of the transition period described in (2) above, which is the exemption provided in Section 7(a)(2)(B) of the Securities Act of 1933 and Section 13(a) of the Securities Exchange Act of 1934 (in each case as amended by the JOBS Act) for complying with new or revised financial accounting standards. EPAM will therefore comply with new or revised financial accounting standards to the same extent that a non-emerging growth company is required to comply with such standards.

PA.

Principles of Consolidation— The consolidated financial statements include the financial statements of EPAM Systems, Inc. and its subsidiaries. All intercompany balances and transactions have been eliminated.

~~Reclassifications~~ — The Company reclassified certain prior period amounts to conform to the current period presentation. Such reclassifications had no effect on the Company’s results of operations or total stockholders’ equity.

Use of Estimates — The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions. These estimates and assumptions affect reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the ~~consolidated~~ financial statements, as well as revenues and expenses during the reporting period. The Company bases its estimates and judgments on historical experience, knowledge of current conditions and its beliefs of what could occur in the future, given available information. Actual results could differ from those estimates, and such differences may be material to the financial statements.

~~Business Combinations~~Reclassification — ~~The~~During the first quarter of 2016, the Company ~~allocates~~revised the ~~total~~classification of certain health insurance premium and other employee fringe benefit expenses between the cost of ~~an acquisition to~~revenues and selling, general and administrative expenses line items on the ~~underlying net assets based on their respective estimated fair values. As part~~statements of income and comprehensive income. The effect of this ~~allocation process,~~reclassification had no impact on total income from operations for the Company identifies and attributes values and estimated lives to the intangible assets acquired. These determinations involve significant estimates and assumptions about several highly subjective variables, including future cash flows, discount rates, and asset lives. There are also different valuation models for each component, the selection of which requires considerable judgment. These determinations will affect the amount of amortization expense recognized in future periods. The Company bases its fair value estimates on assumptions it believes are reasonable, but recognizes that the assumptions are inherently uncertain. Depending on the size of the purchase price of a particular acquisition and the mix of

~~F-8~~

~~Table of Contents~~

~~intangible assets acquired, the purchase price allocation could be materially impacted by applying a different set of assumptions and estimates.~~

year ended December 31, 2016.

Revenue Recognition — The Company recognizes revenue ~~when realized or realizable and earned, which is~~ when the following criteria are met: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the sales price is fixed or determinable; and (4) collectability is reasonably assured. Determining whether and when some of these criteria have been satisfied often involves assumptions and judgments that can have a significant impact on the timing and amount of revenue the Company reports. If there is an uncertainty about the project completion or receipt of payment for the consulting services, revenues are deferred until the uncertainty is sufficiently resolved. At the time revenues are recognized, the Company provides for any contractual deductions and reduces revenues accordingly. The Company defers amounts billed to its clients for revenues not yet earned. Such amounts are anticipated to be recorded as revenues as services are performed in subsequent periods. Unbilled revenues represent services provided which are billed subsequent to the period end in accordance with the contract terms.reported.

The Company derives its revenues from a variety of service offerings, which represent specific competencies of its IT professionals. Contracts for these services have different terms and conditions based on the scope, deliverables, and complexity of the engagement, which require management to make judgments and estimates in determining appropriate revenue ~~recognition pattern.~~recognition. Fees for these contracts may be in the form of time-and-materials or fixed-price arrangements. If there is an uncertainty about the project completion or receipt of payment for the services, revenue is deferred until the uncertainty is sufficiently resolved. At the time revenue is recognized, the Company provides for any contractual deductions and reduces the revenue accordingly.

The Company defers amounts billed to its clients for revenues not yet earned. Such amounts are anticipated to be recorded as revenues when services are performed in subsequent periods. Unbilled revenue is recorded when services have been provided but billed subsequent to the period end in accordance with the contract terms.

The Company reports gross reimbursable “out-of-pocket” expenses incurred as both revenues and cost of revenues in the consolidated statements of income and comprehensive income.

The majority of the Company’s revenues ~~(82.3%~~(88.2% of revenues in ~~2013, 84.1%~~2016, 85.8% in ~~2012~~2015 and ~~86.1%~~84.7% in ~~2011) is~~2014) are generated under time-and-material contracts ~~whereby~~where revenues are recognized as services are performed with the corresponding cost of providing those services reflected as cost of ~~revenues when incurred.~~revenues. The majority of such revenues are billed on an hourly, daily or monthly basis ~~whereby~~as actual time is ~~charged directly to~~incurred on the client.

Revenues from fixed-price contracts ~~(15.7%~~(10.4% of revenues in ~~2013, 13.7%~~2016, 12.8% in ~~2012~~2015 and ~~11.0%~~13.6% in ~~2011)~~2014) are primarily determined using the proportional performance method. In instances where final acceptance of the product, system, or solution is specified by the client, and the acceptance criteria are not objectively determinable to have been met as the services are provided, revenues are deferred until all acceptance criteria have been met. In absence of a sufficient basis to measure progress towards completion, revenue is recognized upon receipt of final acceptance from the client. In order to estimate the amount of revenue for the period under the proportional performance method, the Company determines the percentage of actual labor hours incurred as compared to estimated total labor hours and applies that percentage to the consideration allocated to the deliverable. The complexity of the estimation process and factors relating to the assumptions, risks and uncertainties inherent with the application of the proportional performance method of accounting affects the amounts of revenues and related expenses reported in the Company’s consolidated financial statements. A number of internal and external factors can affect such estimates, including labor hours and specification and testing requirement changes. The cumulative impact of any revision in estimates is reflected in the financial reporting period in which the change in estimate becomes known. No significant revisions occurred in each of the three years ended December 31, ~~2013, 2012~~2016, 2015 and ~~2011.~~2014. The Company’s fixed price contracts are generally recognized over a period of 12 months or less.

From time to time, the Company enters into multiple element arrangements with its customers. In vast majority of cases such multiple-element arrangements represent fixed-priced arrangements to develop a customized IT solution to meet the customer’s needs combined with warranty support over a specified period of time in the future, to which the Company refers to as the “warranty period.” The Company’s customers retain full intellectual property (IP) rights to the results of the Company’s services, and the software element created in lieu of such services is no more than incidental to any of the service deliverables, as defined in accordance with ASC 985-605-15-13. For such arrangements, the Company follows the guidance set forth in ASC 605-25, Revenue Recognition – Multiple Element Arrangements, as to whether multiple deliverables exist, how the arrangement should be separated, and how the consideration should be allocated. The Company recognizes revenue related to the delivered products only if all revenue recognition criteria are met and the delivered element has a standalone value to the customer and allocates total consideration among the deliverables based on their relative selling prices. Revenue related to the software development services is recognized under the proportional performance method, as described above, while warranty support services are recognized on a straight-line basis over the warranty period. The warranty period is generally three months to two years.

~~The Company reports gross reimbursable “out-of-pocket” expenses incurred as both revenues and cost of revenues in the consolidated statements of income.~~

Cost of Revenues (Exclusive of Depreciation and Amortization) — Consists principally of salaries and bonuses of the revenue producing personnel, as well as employee benefits, ~~and stock~~stock-based compensation expense ~~reimbursable~~ and ~~non-reimbursable~~ travel costs ~~and subcontractor fees.~~

for these professionals.

Selling, General and Administrative Expenses — Consist mainly of compensation, benefits and travel expenses ~~associated with promoting~~of the officers, management, sales, marketing and administrative personnel. Other operating expenses included in selling, the Company’s services and include such items as sales and marketing personnel salaries, stock compensation expense and related fringe benefits, commissions, travel, and the cost of advertising and other promotional activities. Generalgeneral and administrative expenses ~~include other operating items such as officers’ and administrative personnel salaries, marketing personnel salaries, stock compensation expense and related fringe benefits,~~are advertising, promotional activities, legal and audit expenses, recruitment and development efforts, insurance, ~~provision for doubtful accounts,~~ and operating lease expenses.

~~F-9~~

~~Table~~ In addition, the Company has issued stock to the sellers and/or personnel in connection with business acquisitions and has been recognizing stock-based compensation expense in the periods after the closing of ~~Contents~~
these acquisitions as part of the selling, general and administrative expenses. Stock option expenses related to acquisitions comprised a significant portion of total selling, general and administrative stock-based compensation expense in 2016 and 2015.

Fair Value of Financial Instruments — The Company makes ~~significant~~ assumptions about fair values of its financial ~~instruments. Fair value is determined based on~~assets and liabilities in accordance with the ~~assumptions that market participants would use in pricing the asset or liability. The Company~~Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 820, “Fair Value Measurement,” and utilizes the following fair value hierarchy in determining ~~fair values:~~inputs used for valuation:

Level 1 — Quoted prices for identical assets or liabilities in active markets.

Level 2 — Inputs other than quoted prices within Level 1 that are observable either directly or indirectly, including quoted prices in markets that are not active, quoted prices in active markets for similar assets or liabilities, and observable inputs other than quoted prices such as interest rates or yield curves.

Level 3 — Unobservable inputs reflecting ~~our~~management’s view about the assumptions that market participants would use in pricing the asset or liability.

Where the fair values of financial assets and liabilities recorded in the consolidated balance ~~sheet~~sheets cannot be derived from an active market, they are determined using a variety of valuation techniques. These valuation techniques include a net present value technique, comparison to similar instruments with market observable inputs, ~~options~~option pricing models and other relevant valuation models. ~~Inputs~~To the extent possible, observable market data is used as inputs into these models ~~are taken from observable market data whenever possible,~~ but ~~in instances where~~when it is not feasible, a degree of judgment is required to establish fair values.

The ~~Company had no assets or~~Company’s contingent liabilities measured at fair value on a recurring basis are comprised of performance-based awards issued to certain former owners of acquired businesses in exchange for future services and cash-settled restricted stock units issued to employees. During a performance measurement period, performance-based awards are valued using significant inputs that are not observable in the market, which are defined as Level 3 inputs according to fair value measurement accounting. The Company estimates the fair value of ~~December 31, 2013 or 2012.~~contingent liabilities based on certain performance milestones of the acquired businesses and estimated probabilities of achievement, then discounts the liabilities to present value using the Company’s cost of debt for the cash component of contingent consideration, and a risk free rate for the stock component of a contractual contingency. The Company believes its estimates and assumptions are reasonable, however, there is significant judgment involved. Changes in the fair value of contingent consideration liabilities primarily result from changes in the timing and amount of specific milestone estimates and changes in probability assumptions with respect to the likelihood of achieving the various earnout criteria.

~~The Company's financial assets and liabilities, with~~Cash-settled restricted stock units issued to employees are valued using the ~~exceptions~~price of ~~employee loans described further herein, are all short term~~the Company’s stock, a significant input that is observable in ~~nature; therefore,~~ the ~~carrying~~market, which is defined as Level 1 input according to fair value measurement accounting.

Changes in the fair value of these ~~items approximates their fair value.~~liabilities could cause a material impact to, and volatility in the Company’s operating results. See Note 17 “Fair Value Measurements.”

Employee ~~Housing~~ Loans— The Company issues employee housing loans in Belarus, relocation loans to ~~its~~assist employees ~~under the Employee Housing Program (“housing loans”). Housing~~with relocation needs in connection with intra-company transfers and loans ~~are issued in U.S. Dollars with a 5-year term and carry an interest rate of 7.5%. The program was designed to be a retention mechanism~~ for the ~~Company’s employees~~purchase of automobiles in ~~Belarus.~~

~~Although permitted by authoritative guidance, the Company did not elect a fair value option for these financial instruments. These housing loans~~India. There are measured at fair value upon initial recognition and subsequently carried at amortized cost less allowance for loan losses. Any difference between the carrying value and the fair value of a loan upon initial recognition (“day-one” recognition) is charged to expense.

The housing loans were classified as Level 3 measurements within the fair value hierarchy because they were valued using significant unobservable inputs. The estimated fair value of these housing loans upon initial recognition was computed by projecting the future contractual cash flows to be received from the loans and discounting those projected net cash flows to a present value, which is the estimated fair value (the “Income Approach”). In applying the Income Approach, the Company analyzed similar loans offered by third-party financial institutions in Belarusian Rubles (“BYR”) and adjusted the interest rates charged on such loans to exclude the effects of underlying economic factors, such as inflation and currency devaluation. The Company also assessed the probability of future defaults and associated cash flows impact. In addition, the Company separately analyzed the rate of return that market participants in Belarus would require when investing in unsecured USD-denominated government bonds with similar maturities (a “risk-free rate”) and evaluated a risk premium component to compensate the market participants for the credit and liquidity risks inherent in the loans’ cash flows, as described in the following paragraph. As a result of the analysis performed, the Company determined the carrying values of the housingno loans issued ~~during the year ended December 31, 2013 approximated~~to principal officers, directors, and their fair values upon initial recognition. The Company also estimated the fair values of the housing loans that were outstanding as of December 31, 2013 using the inputs noted above and determined their fair values approximated the carrying values as of that date.

Repayment of housing loans is primarily dependent on personal income of borrowers obtained through employment with the Company, which income is set in U.S. dollars and is not closely correlated with common macroeconomic risks existing in Belarus, such as inflation, local currency devaluation and decrease in the purchasing power of the borrowers’ income. Given a large demand for the program among the Company’s employees and its advantages as compared to alternative methods of financing available on the market, the Company expects the borrowers to fulfill their obligations, and the Company estimates the probability of voluntary termination of employment among the borrowers as de minimis. Additionally, housing loans are capped at $50 per loan and secured by real estate financed through the program. The Company establishes a maximum loan-to-value ratio of 70% and expects a decrease in the ratio over the life of a housing loan due to on-going payments by employees.

~~Employee loans, other~~ — The Company also issues short-term non-interest bearing relocation loans and other employee loans. These loans are considered Level 3 measurements. The Company’s Level 3, unobservable inputs reflect its assumptions about the factors that market participants use in pricing similar receivables, and are based on the best information available in the circumstances. Due to the short-term nature of employee loans (i.e., the relatively short time between the origination of the instrument and its expected realization), the carrying amount is a reasonable estimate of fair value. As of December 31, 2013, the carrying values of these employee loans approximated their fair values.

~~F-10~~

~~Table of Contents~~

~~Cash and Cash Equivalents~~ — Cash equivalents are short-term, highly liquid investments that are readily convertible into cash, with maturities of three months or less at the date acquired. As of December 31, 2013 and 2012 all amounts were in cash.

~~Restricted Cash~~ ~~— Restricted cash represents cash that is restricted by agreements with third parties for special purposes (see Note 6).~~

~~Accounts Receivable~~ — Accounts receivable are recorded at net realizable value. The Company maintains an allowance for doubtful accounts for estimated losses resulting from the inability of its clients to make required payments. The allowance for doubtful accounts is determined by evaluating the relative creditworthiness of each client, historical collections experience and other information, including the aging of the receivables.

Recoveries of losses from accounts receivable written off in prior years are presented within income from operations on the Company’s consolidated statements of income. There were no collections in respect of prior year write-offs during the years ended December 31, 2013, 2012 or 2011.

~~The table below summarizes movements in qualifying accounts for the years ended December 31, 2013, 2012 and 2011:~~

Balance at
Beginning of
Period

Charged to Costs
and Expenses

Deductions/
Other

Balance at End
of Year
Allowance for Doubtful Accounts (Billed and Unbilled):

Fiscal Year 2011 $ 1,671 $ 1,234 $ (655 ) $ 2,250
Fiscal Year 2012 2,250 1,244 (1,291 ) 2,203
Fiscal Year 2013 2,203 619 (1,022 ) 1,800

~~Employee Loans~~ ~~— Loans are initially recorded at their fair value, and subsequently measured at their amortized cost, less allowance for loan losses, if any.~~affiliates. The Company intends to hold all employee loans until their maturity. Interest income is reported using the effective interest method. Where applicable, loan origination fees, net of direct origination costs, are deferred and recognized in interest income over the life of the loan.

~~Generally, loans are placed~~On a quarterly basis, the Company reviews the aging of its loan portfolio and evaluates the ability of employees to repay their debt on ~~non-accrual status at 90 days past due. The entire balance~~schedule. Factors considered in the review include historical payment experience, reasons for payment delays and shortfalls, if any, as well as probability of a loan is considered delinquent if the minimum payment contractually required to be made is not received by the specified due date. All interest accrued but not collected for loans that are placed on non-accrual is reversed against interest income. Subsequent payments on non-accrual loans are recorded as a reduction ofcollecting scheduled principal and interest ~~income is recorded only after principal recovery is reasonably assured. Non-accrual loans are returned to accrual status when, in~~payments. Since the ~~opinion of management, the financial position~~initiation of the ~~borrower indicates~~loan program there ~~is no longer any reasonable doubt as to the timely collection of interest or principal. Interest income on loans individually classified as impaired is recognized on a cash basis after all~~have not been material past due or non-accrual employee loans or write-offs related to loan losses and, ~~current principal payments have been made.~~

~~Allowance for Loan Losses~~ ~~— The~~therefore, the Company ~~periodically evaluates loans~~determined that exhibit probable or observed credit weaknesses are subject to individual review. Where appropriate, amounts of allowances are allocated to individual loans based on management’s estimate of the borrower’s ability to repay the loan given the availability of collateral, other sources of cash flow and legal options available to the Company. Theno allowance for loan losses is ~~established when losses~~required.

Employee Housing Loans — The Employee Housing Program (the “Housing Program”) provides employees with loans to purchase housing in Belarus. The housing loans are ~~deemed to have occurred~~measured using the Level 3 inputs within the fair value hierarchy because they are valued using significant unobservable inputs. These housing loans are measured at fair value upon initial recognition through ~~a provision~~the market approach under ASC Topic 820, “Fair Value Measurement” and subsequently carried at amortized cost less allowance for loan losses, ~~charged to income~~if any. Any difference between the carrying value and ~~represents management’s estimate of probable credit losses inherent in~~ the ~~loan portfolio. Write-offs of unrecoverable loans are charged against the allowance when management believes the uncollectability~~fair value of a loan ~~balance~~upon initial recognition is charged to expense.

Other Employee Loans — The Company issues short-term, non-interest bearing relocation loans to employees who have relocated within the company. In addition, the Company has in the past issued and ~~any~~may issue in the future a small number of interest ~~due thereon~~bearing loans to employees for the purchase of automobiles. Such loans are issued to qualified employees with certain conditions attached. Due to the short term duration of these employee loans and high certainty of repayment, their carrying amount is ~~confirmed. Subsequent recoveries,~~a reasonable estimate of their fair value.

Business Combinations — The Company accounts for its business combinations using the acquisition accounting method, which requires it to determine the fair value of net assets acquired and the related goodwill and other intangible assets in accordance with the FASB ASC Topic 805, “Business Combinations.” The Company identifies and attributes fair values and estimated lives to the intangible assets acquired and allocates the total cost of an acquisition to the underlying net assets based on their respective estimated fair values. Determining the fair value of assets acquired and liabilities assumed requires management’s judgment and involves the use of significant estimates, including projections of future cash inflows and outflows, discount rates, asset lives and market multiples. There are different valuation models for each component, the selection of which requires considerable judgment. These determinations will affect the amount of amortization expense recognized in future periods. The Company bases its fair value estimates on assumptions it believes are reasonable, but recognizes that the assumptions are inherently uncertain.

All acquisition-related costs, other than the costs to issue debt or equity securities, are accounted for as expenses in the period in which they are incurred. Changes in fair value of contingent consideration arrangements that are not measurement period adjustments are recognized in earnings. Payments to settle contingent consideration, if any, are ~~credited~~reflected in cash flows from financing activities and the changes in fair value are reflected in cash flows from operating activities in the Company’s consolidated statements of cash flows.

The acquired assets typically consist of customer relationships, trade names, non-competition agreements, and workforce and as a result, a substantial portion of the purchase price is allocated to goodwill and other intangible assets.

Cash and Cash Equivalents — Cash equivalents are short-term, highly liquid investments that are readily convertible into cash, with maturities of three months or less at the ~~provision~~date acquired. As of December 31, 2016 and 2015 the Company had no cash equivalents.

Restricted Cash — Restricted cash represents cash that is restricted by agreements with third parties for ~~bad debts.~~special purposes or is subject to other limiting conditions. See Note 7 for items that constitute restricted cash.

~~F-11~~

~~Table~~Accounts Receivable — Accounts receivable are stated net of ~~Contents~~

an allowance for doubtful accounts. Outstanding accounts receivable are reviewed periodically and allowances are provided at such time management believes it is probable that such balances will not be collected within a reasonable time. The allowance for doubtful accounts is determined by evaluating the relative creditworthiness of each client, historical collections experience and other information, including the aging of the receivables. Accounts receivable are generally written off when they are deemed uncollectible. Bad debts are recorded based on historical experience and management’s evaluation of accounts receivable.

Property and Equipment — Property and equipment acquired in the ordinary course of the Company’s operations are stated at cost, net of accumulated depreciation. Depreciation is calculated on the straight-line basis over the estimated useful lives of the assets generally ranging from 3two to 50fifty years. Leasehold improvements are amortized on a straight-line basis over the shorter of the term of the lease or the estimated useful life of the improvement. Maintenance and repairs are expensed as ~~incurred, while renewals and betterments are capitalized.~~

incurred.

Goodwill and Other Intangible Assets— The Company accounts for its business combinations using the acquisition accounting method, which requires it to determine the fair value of net assets acquired and the related goodwill and other intangible assets. Determining the fair value of assets acquired and liabilities assumed requires management’s judgment and involves the use of significant estimates, including projections of future cash inflows and outflows, discount rates, asset lives and market multiples. The Company’s acquisitions usually do not have significant amounts of tangible assets, as the principal assets it typically acquires are customer relationships, trade names, non-competition agreements, and workforce. As a result, a substantial portion of the purchase price is allocated to goodwill and other intangible assets.

Goodwill and intangible assets that have indefinite useful lives are treated consistently with FASB ASC 350, “Intangibles — Goodwill and Other.” The Company does not ~~amortized but are tested annually for impairment. Events~~have any intangible assets with indefinite useful lives.

The Company conducts its evaluation of goodwill impairment at the reporting unit level on an annual basis as of October 31^st, and more frequently if events or circumstances indicate that ~~might require impairment testing of goodwill and other intangible assets include~~ the ~~loss of a significant client, the identification of other impaired assets within a reporting unit, loss of key personnel, the disposition of a significant portion~~carrying value of a reporting unit ~~significant decline in stock price~~exceeds its fair value. A reporting unit is a reportable segment or ~~a significant adverse change in business climate or regulations. Intangible assets that have finite useful lives are amortized over their estimated useful lives on a straight-line basis.~~

As of December 31, 2013 and 2012, all of the Company’s intangible assets had finite lives and the Company did not incur any impairment losses in respect of its intangible assets during the years ended December 31, 2013, 2012 or 2011.

~~Effective in the fourth quarter of 2013, the Company changed the annual goodwill impairment assessment date for all of its reporting units from December 31~~^st ~~to October 31~~^st~~, which represented a voluntary change in the annual goodwill impairment testing date.~~one level below. The Company ~~is also required~~initially performs a qualitative assessment of goodwill to ~~assess the goodwill of its reporting units~~test for impairment ~~between annual~~indicators. After applying the qualitative assessment, ~~dates when events or circumstances dictate. This change does~~if the entity concludes that it is not ~~delay, accelerate or avoid an impairment charge and~~more likely than not that the fair value of goodwill is ~~preferable as additional resources for~~less than the ~~preparation, review, and conclusion of~~carrying amount; the ~~annual~~two-step goodwill impairment test ~~are available at this time. Further, this timing more closely aligns with the Company’s annual budgeting and planning process. Information prepared during the annual budgeting and planning process~~ is used extensively in the Company’s impairment assessment. The Company evaluates the recoverability of goodwill at a reporting unit level and it had three reporting units that were subject to the annual impairment testing in 2013. The Company’s annual impairment review as of October 31, 2013 and December 31, 2012 did not ~~result in an impairment charge for any of these reporting units. It was impracticable to apply this change retrospectively, as~~required.

If the Company determines that it is ~~unable to objectively determine significant estimates and assumptions~~more likely than not that ~~would have been used in those earlier periods without~~ the ~~use of hindsight.~~

~~For~~carrying amount exceeds the ~~Company’s annual impairment test, it compares the respective~~ fair value, the Company performs a quantitative impairment test. If an indicator of ~~its reporting units to their respective carrying values in order to determine if~~ impairment is ~~indicated. If so,~~identified, the implied fair value of the reporting unit’s goodwill is compared to its carrying amount, and the impairment loss is measured by the excess of the carrying value over the fair value. The fair values are estimated using a combination of the income approach, which incorporates the use of the discounted cash flow method, and the market approach, which incorporates the use of earnings multiples based on market data. These valuations are considered Level 3 measurements under FASB ASC Topic 820. The Company utilizes estimates to determine the fair value of the reporting units such as future cash flows, growth rates, capital requirements, effective tax rates and projected margins, among other factors. Estimates utilized in the future evaluations of goodwill for impairment could differ from estimates used in the current period calculations.

Intangible assets that have finite useful lives are amortized over their estimated useful lives on a straight-line basis. When facts and circumstances indicate potential impairment of amortizable intangible assets, the Company evaluates the recoverability of the asset’s carrying value, using estimates of ~~undiscounted~~ future cash flows ~~that utilize a discount rate determined by its management to be commensurate with the risk inherent in the Company’s business model~~ over the remaining asset life. The estimates of future cash flows attributable to intangible assets require significant judgment based on the Company’s historical and anticipated results. Any impairment loss is measured by the excess of carrying value over fair value.

Impairment of Long-Lived Assets — Long-lived assets, such as property and equipment, and finite-lived intangible assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be ~~recoverable. The assessment for potential impairment is based primarily on~~recoverable and exceeds the ~~Company’s ability to recover~~asset’s fair value. When the carrying value of ~~its long-lived assets from expected future~~an asset is more than the sum of the undiscounted cash flows that are expected to result from ~~its operations on an undiscounted basis at each reporting date. If such assets are determined~~the asset’s use and eventual disposition, it is considered to be ~~impaired, the impairment recognized is the amount by which the~~unrecoverable. Therefore, when an asset’s carrying value ~~of the assets exceeds the~~will not be recovered and it is more than its fair value, of the ~~assets.~~Company would deem the asset to be impaired. Property and equipment ~~to be disposed of by sale is~~held for disposal are carried at the lower of the ~~then~~ current carrying value or fair value less estimated costs to sell. The Company did not incur any impairment of long-lived assets for ~~2013, 2012, or 2011.~~

the years ended December 31, 2016 and 2015. The Company wrote off $1,149 related to the building construction in Minsk, Belarus against allowance for losses in the year ended December 31, 2014.

Income Taxes — The provision for income taxes includes federal, state, local and foreign taxes. Deferred tax assets and liabilities are recognized for the estimated future tax consequences of temporary differences between the financial statement carrying amounts and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to

~~F-12~~

~~Table of Contents~~

taxable income in the year in which the temporary differences are expected to be reversed. Changes to enacted tax rates would result in either increases or decreases in the provision for income taxes in the period of changes. The Company evaluates the realizability of deferred tax assets and recognizes a valuation allowance when it is more likely than not that all, or a portion of, deferred tax assets will not be realized.

The realization of deferred tax assets is primarily dependent on future earnings. Any reduction in estimated forecasted results may require that we record valuation allowances against deferred tax assets. Once a valuation allowance has been established, it will be maintained until there is sufficient positive evidence to conclude that it is more likely than not that the deferred tax assets will be realized. A pattern of sustained profitability will generally be considered as sufficient positive evidence to reverse a valuation allowance. If the allowance is reversed in a future period, the income tax provision will be correspondingly reduced. Accordingly, the increase and decrease of valuation allowances could have a significant negative or positive impact on future earnings. See Note 1011 to the consolidated financial statements for further information.

Changes in tax laws and rates may affect recorded deferred tax assets and liabilities and our effective tax rate in the future. The American Taxpayer Relief Act of 2012 (the “Act”) was signed into law on January 2, 2013. Because a change in tax law is accounted for in the period of enactment, certain provisions of the Act benefiting the Company’s 2012 U.S. federal taxes, including the Subpart F controlled foreign corporation look-through exception were not recognized in the Company’s 2012 financial results and instead were reflected in the Company’s 2013 financial results.

Earnings per Share (“EPS”) —Basic EPS is computed by dividing ~~the net~~ income ~~applicable~~available to common ~~stockholders for the period~~shareholders by the ~~weighted average~~weighted-average number of shares of common stock outstanding during the ~~same~~ period. The Company’s Series A-1 Preferred, Series A-2 Preferred, and Series A-3 Preferred Stock, that had been outstanding and convertible into common stock until February 13, 2012 (the date of the Company’s initial public offering), and our puttable common stock were considered participating securities since these securities had non-forfeitable rights to dividends or dividend equivalents during the contractual period and thus required the two-class method of computing EPS. When calculating diluted EPS, the numeratorDiluted earnings per share is computed by ~~adding back~~dividing income available to common shareholders by the ~~undistributed earnings allocated to the participating securities in arriving at the basic EPS and then reallocating such undistributed earnings among our~~weighted-average number of shares of common stock ~~participating securities and~~outstanding during the ~~potential common shares that result from the assumed exercise of all dilutive options. The denominator is~~period increased to include the number of additional shares of common ~~shares~~stock that would have been outstanding ~~had~~if the ~~options~~potentially dilutive securities had been issued.

Potentially dilutive securities include outstanding stock options, unvested restricted stock and unvested restricted stock units (“RSUs”). The dilutive effect of potentially dilutive securities is reflected in diluted earnings per share by application of the treasury stock method.

~~Accounting for~~ Stock-Based ~~Employee~~ Compensation ~~Plans~~ — ~~Stock-based compensation expense for~~The Company recognizes the cost of its stock-based incentive awards ~~of equity instruments to employees and non-employee directors is determined~~ based on the ~~grant-date~~ fair value of the ~~awards ultimately expected to vest. The Company recognizes these~~award at the date of grant net of estimated forfeitures. Stock-based compensation ~~costs~~cost is recognized as expense on a straight-line basis over the requisite service period. The service period is the period over which the employee performs the related services, which is normally the same as the vesting period. Over time, the forfeiture assumption is adjusted to the actual forfeiture rate and such change may affect the timing of the ~~award, which is generally~~total amount of expense recognized over the ~~option~~ vesting ~~term of four years (See Note14.)~~

~~The Company estimates forfeitures~~period. Equity-based awards that do not require future service are expensed immediately. Equity-based awards that do not meet the criteria for equity classification are recorded as liabilities and adjusted to fair value at the ~~time~~end of grant and revises its estimates, if necessary, in subsequent periods if actual forfeitures or vesting differ from those estimates. Such revisions could have a material effect on the Company’s operating results. The assumptions used in the valuation model are based on subjective future expectations combined with management judgment. If any of the assumptions used in the valuation model changes significantly, stock-based compensation for future awards may differ materially compared to the awards previously granted.

each reporting period.

Off-Balance Sheet Financial Instruments — ~~Off-balance~~The Company uses the FASB ASC Topic 825, “Financial Instruments.” to identify and disclose off-balance sheet financial instruments, which include credit instruments, such as commitments to make employee loans and related guarantees, standby letters of credit and certain guarantees issued under customer contracts. The face amount for these items represents the exposure to loss, before considering available collateral or the borrower’s ability to repay. ~~Such financial instruments are recorded when they are funded.~~ Loss contingencies arising from off-balance sheet ~~credit exposures~~financial instruments are recorded as liabilities when the likelihood of loss is probable and an amount or range of loss can be reasonably estimated. The Company does not believe ~~there are~~ such matters exist that ~~will~~would have a material effect on the ~~consolidated~~ financial statements.

Foreign Currency Translation — Assets and liabilities of consolidated foreign subsidiaries, whose functional currency is the local currency, are translated to U.S. dollars at period end exchange rates. Revenues and expenses are translated to U.S. dollars at daily exchange rates. The adjustment resulting from translating the financial statements of such foreign subsidiaries to U.S. dollars is reflected as a cumulative translation adjustment and reported as a component of accumulated other comprehensive income.

The Company reports the effect of exchange rate changes on cash balances held in foreign currencies as a separate item in the reconciliation of the changes in cash and cash equivalents during the period. Transaction gains and losses are included in the period in which they occur.

Risks and Uncertainties — ~~Principally all of the Company’s IT delivery centers and~~As a ~~majority~~result of its ~~employees is located in Central and Eastern Europe. As a result,~~global operations, the Company may be subject to certain risks associated with international operations, risks associated with the application and imposition of protective legislation and regulations relating to import and export, or otherwise resulting from foreign policy or the variability of foreign economic or political conditions. Additional risks associated with

~~F-13~~

~~Table of Contents~~

international operations include difficulties in enforcing intellectual property rights, the burdens of complying with a wide variety of foreign laws, potential geopolitical and other risks associated with potentially adverse tax consequences, tariffs, quotas and other barriers.inherent risks.

Concentration of Credit — Financial instruments that potentially subject usthe Company to ~~significant~~ concentrations of credit risk consist primarily of ~~employee loans,~~ cash and cash equivalents, trade accounts receivable and unbilled revenues.

At December 31, 2013, loans issued to employees were $6,390, or 1.5%, of our total assets. These loans expose the Company to a risk of non-payment and loss. Repayment of these loans is primarily dependent on personal income of borrowers obtained through their employment with EPAM and may be adversely affected by changes in macroeconomic situations, such as higher unemployment levels, currency devaluation and inflation. Additionally, continuing financial stability of a borrower may be adversely affected by job loss, divorce, illness or personal bankruptcy. The Company also faces the risk that the collateral will be insufficient to compensate it for loan losses, if any, and costs of foreclosure. Decreases in real estate values could adversely affect the value of property used as collateral, and the Company may be unsuccessful in recovering the remaining balance from either the borrower and/or guarantors.

The Company maintains ~~its~~ cash and cash equivalents and short-term deposits with financial institutions. The Company determined that the Company’s credit policies reflect normal industry terms and business risk and there is no expectation of non-performance by the counterparties. As of December 31, ~~2013, $103.1~~2016, $194.6 million of total cash, including time deposits and restricted cash, was held in CIS countries, with ~~$73.9~~$153.8 million of that total in Belarus. Banking and other financial systems in the CIS region are less developed and regulated than in some more developed markets, and legislation relating to banks and bank accounts is subject to varying interpretations and inconsistent application. Banks in the CIS generally do not meet the banking standards of more developed markets, and the transparency of the banking sector lags behind international standards. Furthermore, bank deposits made by corporate entities in the CIS region are not insured. As a result, the banking sector remains subject to periodic instability. Another banking crisis, or the bankruptcy or insolvency of banks through which the Company receives or with which it holds funds, particularly in Belarus, may result

Changes in the ~~loss~~market behavior or decisions of ~~its deposits or adversely affect its ability to complete banking transactions in~~ the ~~CIS, which~~Company’s clients could ~~materially~~ adversely affect the Company’s ~~business and financial condition.~~

~~Trade accounts receivable and unbilled revenues are generally dispersed across EPAM’s customers in proportion to their revenues.~~results of operations. During the years ended December 31, ~~2013, 2012~~2016, 2015 and ~~2011,~~2014, revenues from our top five customers were ~~$169,987, $ 134,484,~~$327,092, $298,063 and ~~$107,171,~~$239,396, respectively, representing ~~30.6%~~28.2%, ~~31.0%~~32.6% and ~~32.0%~~32.8%, respectively, of total revenues in the corresponding periods. Revenues from ~~the Company’s~~our top ten customers were ~~$234,955, $192,426~~$442,253, $400,250 and ~~$149,094~~$320,126 in ~~2013, 2012~~2016, 2015 and ~~2011,~~2014, respectively, representing ~~42.3%~~38.1%, ~~44.4%,~~43.8% and ~~44.6%~~43.9%, respectively, of total revenues in corresponding periods. No customer accounted for over 10% of total revenues in 2013 or 2012. As of December 31, 2013, unbilled revenues from two customers individually exceeded 10% of total unbilled revenues and jointly accounted for 33.3% of total unbilled revenues as of that date; and one customer accounted for over 10% of total accounts receivable as of that date.

During the years ended December 31, 2013, 2012 and 2011 the Company incurred subcontractor costs of $2,078, $3,535 and $4,545, respectively, to a vendor for staffing, consulting, training, recruiting and other logistical / support services provided for the Company’s delivery and development operations in Eastern Europe. Such costs are included in cost of revenues and sales, general and administrative expenses, as appropriate, in the accompanying consolidated statements of income and comprehensive income.

Foreign currency risk — The Company’s global operations are conducted predominantly in U.S. dollars. Other than U.S. dollars, the Company generates a significant portion of revenues in various ~~global markets based on client contracts obtained in non-U.S. dollar~~ currencies, principally, ~~Euros,~~euros, British pounds sterling, Canadian dollars, Swiss francs and Russian ~~Rubles. The Company~~rubles and incurs expenditures ~~in non-U.S. dollar currencies,~~ principally in Hungarian ~~Forints, Euros,~~forints, Russian rubles, Polish zlotys, Swiss francs, British pounds sterling, Indian rupees and ~~Russian Rubles~~China yuan renminbi (“CNY”) associated with ~~the IT~~its delivery ~~centers located~~centers.

The Company’s international operations expose it to foreign currency exchange rate changes that could impact translations of foreign denominated assets and liabilities into U.S. dollars and future earnings and cash flows from transactions denominated in ~~CEE.~~different currencies. The Company is exposed to fluctuations in foreign currency exchange rates primarily onrelated to accounts receivable and unbilled revenues from sales in ~~these~~ foreign currencies and cash ~~flows~~outflows for expenditures in foreign currencies. The ~~Company does not~~Company’s results of operations, primarily revenues and expenses denominated in foreign currencies, can be affected if any of the currencies, which we use ~~derivative financial instruments to hedge~~materially in our business, appreciate or depreciate against the ~~risk of foreign exchange volatility.~~U.S. dollar.

Interest rate risk — The Company’s exposure to market risk ~~for~~is influenced primarily by changes in interest rates ~~relates primarily to the Company’s~~on interest payments received on cash and cash ~~equivalents~~equivalent deposits and paid on any outstanding balance on the ~~LIBOR plus 1.25% rate long-term~~Company’s revolving line of credit, ~~facility (see Note 12)~~which is subject to a variety of rates depending on the type and timing of funds borrowed (Note 13). The Company does not use derivative financial instruments to hedge the risk of interest rate volatility.


2.	RECENT ACCOUNTING PRONOUNCEMENTS

~~Recent Accounting Pronouncements~~ ~~— In January 2013, the FASB issued~~Adoption of New Accounting Standards ~~Update (“ASU”) 2013-01, “Clarifying~~

Unless otherwise discussed below, the Scope of Disclosures about Offsetting Assets and Liabilities.” The ASU clarifies that ordinary trade receivables and receivables are not in the scope of ASU 2012-11, “Disclosures about Offsetting Assets and Liabilities.” ASU 2012-11 applies only to derivatives, repurchase agreements and reverse purchase agreements, and securities borrowing and securities lending transactions that are either offset in accordance with specific criteria contained in the Codification or subject to a master netting arrangement or similar agreement. The ASU is effective for fiscal years beginning on or after January 1, 2013, and interim periods within those annual periods and requires retrospective application for all comparative periods presented. The Company adopted the ASU effective January 1, 2013. The adoption of ~~this standard~~new accounting standards did not have ~~any effect~~an impact on the Company’s consolidated financial ~~condition,~~position, results of operations, and cash flows.

~~F-14~~

Balance Sheet Classification of Deferred Taxes — Effective April 1, 2016, the Company adopted Accounting Standard Update (“ASU”) No. 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes, which resulted in the reclassification of current deferred tax assets and current deferred tax liabilities to non-current deferred tax assets and non-current deferred tax liabilities on its condensed consolidated balance sheets. No prior periods were retrospectively adjusted. See Note 11.

~~Table~~Simplifying the Accounting for Measurement-Period Adjustments — Effective January 1, 2016, the Company adopted the amended guidance of ~~Contents~~

Accounting Standards Codification (“ASC”) Topic 805, Business Combinations, which simplifies the accounting for adjustments made to provisional amounts recognized in a business combination. The amended guidance requires an acquirer to recognize adjustments to provisional amounts identified during the measurement period in the reporting period in which the adjustment amounts are determined. The adoption of this amended guidance did not have a significant impact on the Company’s financial results.

Presentation of Debt Issuance Costs — In ~~February 2013,~~April 2015, the FASB issued ASU ~~2013-02, “Reporting~~2015-03, Interest-Imputation of ~~Amounts Reclassified Out~~Interest (Subtopic 835-30): Simplifying the Presentation of ~~Accumulated Other Comprehensive Income,” which adds new disclosure requirements for items reclassified out of accumulated other comprehensive income (“AOCI”~~Debt Issuance Costs.~~) The~~ ASU ~~is intended~~2015-03 requires that debt issuance costs related to help entities improve the transparency of changes in other comprehensive income (OCI) and items reclassified out of AOCI in their financial statements. It does not amend any existing requirements for reporting net income or OCI in the financial statements. New disclosure requirements are effective for fiscal periods beginning after December 15, 2012 and are applied prospectively. The Company adopted the ASU effective January 1, 2013. The adoption of this standard did not have any effecta recognized debt liability be presented on the ~~Company’s financial reporting because~~balance sheet as a direct deduction from the ~~only item~~carrying amount of that ~~had historically affected AOCI~~debt liability, consistent with debt discounts. Previously, debt issuance costs were recognized as deferred charges and ~~therefore included in cumulative AOCI was currency translation adjustments.~~

recorded as other assets. In ~~March 2013,~~August 2015, the FASB issued ASU ~~2013-05, “Parent’s~~2015-15, Interest-Imputation of Interest (Subtopic 835-30): Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements. ASU 2015-15 allows an entity to defer and present debt issuance costs as an asset and subsequently amortize the deferred debt issuance costs ratably over the term of the line-of-credit arrangement, regardless of whether there are any outstanding borrowings on the line-of-credit arrangement. The guidance was effective January 1, 2016. The Company early adopted the standards effective December 31, 2015 and elected to continue to classify debt issuance costs associated with its revolving line of credit in other assets. Although the impact of applying these standards to its existing revolving facility has been immaterial, the standards could have a significant impact on the accounting for future borrowings.

Pending Accounting ~~for~~Standards

From time to time, new accounting pronouncements are issued by the ~~Cumulative Translation Adjustment~~FASB or other standards-setting bodies that the Company will adopt according to the various timetables the FASB specifies. Unless otherwise discussed below, the Company believes the impact of recently issued standards that are not yet effective will not have a material impact on its consolidated financial position, results of operations and cash flows upon ~~Derecognition~~adoption.

Stock-Based Compensation — Effective January 1, 2017, the Company will be required to adopt the various amendments in ASU 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. The provisions of ~~Certain Subsidiaries~~the new guidance affecting the Company require excess tax benefits and tax deficiencies to be recorded in the income statement when the awards vest or ~~Groups of Assets within a Foreign Entity or of an Investment~~are settled; remove the requirement to include hypothetical excess tax benefits in ~~a Foreign Entity.” ASU 2013-05 updates accounting guidance related to~~ the application of ~~consolidation~~the treasury stock method when computing earnings per share; and provided for a new policy election to either: (1) continue applying forfeiture rate estimates in the determination of compensation cost, or (2) account for forfeitures as a reduction of share-based compensation cost as they occur. The new guidance also requires cash flows related to excess tax benefits to be classified as an operating activity in the cash flow statement and ~~foreign currency matters. This~~now requires shares withheld for tax withholding purposes to be classified as a financing activity.

While the Company is still evaluating the impact of adoption of the new guidance, ~~resolves~~it believes the ~~diversity~~new standard will cause volatility in ~~practice about what guidance applies~~its effective tax rates as well as basic and diluted earnings per share due to the ~~release~~tax effects related to share-based payments being recorded to the income statement (rather than equity.) The volatility in future periods will depend on the Company’s stock price at the awards’ vesting dates, geographical mix and tax rates in applicable jurisdictions, as well as the number of awards that vest in each period. The Company will adopt provisions related to recognition of excess tax benefits and tax deficiencies in income on a prospective basis and is in the process of evaluating transition alternatives for various other provisions of the ~~cumulative translation adjustment into net income. This~~new guidance. The Company will not change its accounting policy and will continue to estimate forfeitures in the determination of its compensation cost. In addition, cash flows related to excess tax benefits will be included in cash provided by operating activities and will no longer be separately classified as a financing activity. Further, consistent with historical presentation, the Company will continue to classify shares withheld for tax withholding purposes as a financing activity.

Simplifying the Measurement for Goodwill — Effective January 1, 2017, the Company will early adopt the new accounting guidance ~~is effective~~simplifying the accounting for ~~interim and annual periods beginning after December 15, 2013.~~goodwill impairment. The guidance removes Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. The new guidance will be applied prospectively. The Company does not expect the adoption of this ~~pronouncement~~amended guidance to have ~~a material effect~~an impact on its financial ~~condition, results of operations and cash flows.~~results.

Revenue Recognition — In ~~July 2013,~~May 2014, the FASB issued ASU ~~2013-11, “Presentation~~2014-09, Revenue from Contracts with Customers (Topic 606). The core principle of ASU 2014-09 is that an ~~Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss,~~entity should recognize revenue to depict the transfer of promised goods or ~~a Tax Credit Carryforward Exists.”~~services in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU ~~2013-11~~2014-09 will replace most existing revenue recognition guidance in GAAP and permits the use of either the retrospective or modified retrospective transition method. The update requires significant additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments. ASU 2014-09, as amended by ASU 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, is aeffective for years beginning after December 15, 2017, including interim periods, with early adoption permitted for years beginning after December 15, 2016. Since the issuance of ASU 2014-09, the FASB has issued additional interpretive guidance, including new accounting standards updates, that clarify certain points of the standard and modify certain requirements.

The Company has performed a review of the requirements of the new revenue standard and is monitoring the activity of the FASB and the transition resource group as it relates to specific interpretive guidance. It is reviewing customer contracts and is in the process of applying the five-step model of the new standard to each contract category it has identified and will compare the results to its current accounting practices. The Company plans to adopt ASU 2014-09, as well as other clarifications and technical guidance issued by the FASB related to this new revenue standard, on January 1, 2018.

The Company expects the new standard could change the amount and timing of revenue and costs under certain arrangement types. The Company is also assessing pricing provisions contained in certain of its customer contracts. Pricing provisions contained in some of its customer contracts represent variable consideration or may provide the customer with a material right, potentially resulting in a different allocation of the transaction price than under current guidance. Due to the complexity of certain of the Company’s contracts, the actual revenue recognition treatment required under the new standard for these arrangements may be dependent on contract-specific terms and may vary in some instances. The Company has not yet determined what impact the new guidance will have on its consolidated financial statements and/or related disclosures or concluded on the transition method. The Company expects to further its assessment of the financial ~~statement presentation~~impact of ~~unrecognized tax benefits. The~~the new standard provides that a liability related to an unrecognized tax benefit would be presented as a reduction of a deferred tax asset for a net operating loss carryforward, a similar tax loss or a tax credit carryforward if such settlement is required or expectedguidance on its consolidated financial statements in ~~the event the uncertain tax position is disallowed. The new standard becomes effective for the periods commencing~~2017.

Leases — Effective January 1, ~~2014,~~2019, the Company will be required to adopt the new guidance of ASC Topic 842, Leases (with early adoption permitted effective January 1, 2018.) This amendment supersedes previous accounting guidance (Topic 840) and ~~it should~~requires all leases, with the exception of leases with a term of twelve months or less, to be ~~applied prospectively~~recorded on the balance sheet as lease assets and lease liabilities. The standard requires lessees and lessors to ~~unrecognized tax benefits~~recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. The modified retrospective approach includes a number of optional practical expedients that ~~exist at~~entities may elect to apply. These practical expedients relate to the identification and classification of leases that commenced before the effective date, initial direct costs for leases that commenced before the effective date, and the ability to use hindsight in evaluating lessee options to extend or terminate a lease or to purchase the underlying asset. An entity that elects to apply the practical expedients will, in effect, continue to account for leases that commence before the effective date in accordance with ~~retrospective application permitted.~~previous GAAP unless the lease is modified, except that lessees are required to recognize a right-of-use asset and a lease liability for all operating leases at each reporting date based on the present value of the remaining minimum rental payments that were tracked and disclosed under previous GAAP. The transition guidance in Topic 842 also provides specific guidance for the amounts previously recognized in accordance with the business combinations guidance for leases. The Company ~~is currently assessing~~has not yet completed its assessment of the ~~impacts~~impact of ~~this~~the new ~~standard~~guidance on its consolidated financial ~~conditions, results~~statements, when it will adopt the standard, or concluded on whether it will elect to apply practical expedients.

Measurement of ~~operating~~Credit Losses on Financial Instruments — Effective January 1, 2020, the Company will be required to adopt the amended guidance of ASC Topic 326, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial instruments, (with early adoption permitted effective January 1, 2019.) The amendments in this update change how companies measure and ~~cash flows.~~recognize credit impairment for many financial assets. The new expected credit loss model will require companies to immediately recognize an estimate of credit losses expected to occur over the remaining life of the financial assets (including trade receivables) that are in the scope of the update. The update also made amendments to the current impairment model for held-to-maturity and available-for-sale debt securities and certain guarantees. Entities are required to adopt the standard using a modified-retrospective approach through a cumulative effect adjustment to retained earnings as of the beginning of the period of adoption. The Company has not yet completed its assessment of the impact of the new guidance on its consolidated financial statements or concluded on when it will adopt the standard.

Tax Accounting for Intra-Entity Asset Transfers — Effective January 1, 2018, with early adoption permitted, the Company will be required to adopt the accounting guidance ASU 2016-16, Accounting for Income taxes: Inter-Entity Asset Transfers of Assets Other than Inventory, that will require the tax effects of intra-entity asset transfers to be recognized in the period when the transfer occurs. Under current guidance, the tax effects of intra-entity sales of assets are deferred until the transferred asset is sold to a third party or otherwise recovered through use. The new guidance does not apply to intra-entity transfers of inventory and is required to be applied on a modified retrospective basis through a cumulative effect adjustment to retained earnings as of the beginning of the period of adoption. The Company has not yet completed its assessment of the impact of the new guidance on its consolidated financial statements or concluded on when it will adopt the standard.

2.
3.	ACQUISITIONS

The Company’s acquisitions allow it to expand into desirable geographic locations, complement its existing vertical markets, increase revenue and create new service offerings. Acquisitions were settled in cash and/or stock where a portion of the settlement price may have been deferred. For some transactions, purchase agreements contain contingent consideration in the form of an earnout obligation.

2015 Acquisitions

~~Empathy Lab, LLC~~ NavigationArts — On ~~December 18, 2012,~~July 10, 2015, the Company ~~completed its acquisition of substantially~~acquired all of the ~~assets~~outstanding equity of NavigationArts, Inc. and ~~assumed certain liabilities of Empathy Lab,~~its subsidiary, NavigationArts, LLC ~~(“Empathy Lab”~~(collectively “NavigationArts”),. The U.S.-based NavigationArts provided digital consulting, architecture and content solutions and was regarded as a ~~U.S.-based digital strategy and multi-channel experience design firm.~~leading user-experience agency. The acquisition ~~has enhanced~~of NavigationArts added approximately 90 design consultants to the Company’s ~~strong capabilities in global delivery of software engineering services~~headcount. In connection with the proven expertise in two important growth areas-development and execution of enterprise-wide eCommerce initiatives and transformation of media consumption and distribution channels. In addition to strengthening our Travel and Consumer and Business Information and Media verticals, Empathy Lab brings significant expertise in digital marketing strategy consulting and program management.

~~The total preliminary purchase price of $27,257 was allocated to net tangible and intangible assets based on their estimated fair values as of December 18, 2012. During the second quarter of 2013,~~NavigationArts acquisition the Company ~~finalized the fair values of the assets acquired and liabilities assumed. As a result, total~~paid $28,747 as cash consideration, ~~transferred was set at $27,172, as presented in the following table. The purchase price was paid in cash,~~ of which ~~approximately 10%~~$2,670 was placed in escrow for a period of 18 months as a security for the indemnification obligations of the sellers under the terms of the stock purchase agreement. In the first quarter of 2016, the Company decided to make a 338(h)(10) election to treat the NavigationArts acquisition as an asset purchase ~~agreement.~~

~~The purchase price was allocated to~~for tax purposes. As a result, during the ~~assets acquired based on their related fair values, as follows:~~

Amount
Cash and cash equivalents $ 1,191
Trade receivables and other current assets 5,983
Property and equipment 186
Deferred tax asset 30
Acquired intangible assets 11,200
Goodwill 11,359
Total assets acquired 29,949
Accounts payable and accrued expenses 1,113
Deferred revenue and other liabilities 1,664
Total liabilities assumed 2,777
Net assets acquired $ 27,172

~~In addition,~~second quarter of 2016 the Company ~~issued~~paid an additional $1,797 to the sellers of NavigationArts, as provided for in the stock purchase agreement. The acquired goodwill that is deductible for tax purposes was $23,794 as of the date of the acquisition.

AGS— On November 16, 2015, the Company acquired all of the outstanding equity of Alliance Consulting Global Holdings, Inc including its wholly-owned direct and indirect subsidiaries Alliance Global Services, Inc., Alliance Global Services, LLC, companies organized under the laws of the U.S., and Alliance Global Services IT India, a ~~total~~company organized under the laws of ~~327,827 shares~~India (collectively, “AGS”). AGS provided software product development services and test automation solutions and had multiple locations in the United States and India. The acquisition of ~~non-vested (“restricted”) common stock contingent on their continued employment~~AGS added 1,151 IT professionals to the Company’s headcount in the United States and India. In connection with the AGS acquisition the Company ~~(Note 14), including 1,483 shares issued on July 11, 2013, to settle the difference between the initial number~~paid $51,717 as cash consideration, of ~~shares issued upon acquisition and the total number of shares due in connection with this transaction. Of these shares, 65,500 shares were~~which $5,000 was placed in escrow for a period of 1815 months as a security for the indemnification obligations of the sellers under the ~~asset~~terms of the stock purchase agreement. ~~The restricted stock had an estimated value of $6,797 at the time of grant and will be~~

~~F-15~~

~~Table of Contents~~

~~recorded as a stock-based compensation expense over an associated service period of three years.~~

The ~~Company also agreed to issue stock options to certain employees acquired through~~following is a summary of the Empathy Lab acquisition. The stock options were issued in the amount by which the acquiree’s revenue exceeded the target revenue for the first half of 2013, as defined by the purchase agreement, and were issued under the Company’s current long-term incentive plan. The stock options are subject to all vesting restrictions and other terms and conditions customary for the Company.

~~The Company performed a valuation analysis to determine the~~estimated fair values of ~~certain~~the net assets acquired at the date of each respective acquisition as originally reported during the year 2015 and at December 31, 2016:



	NavigationArts				AGS				Total
	As Originally Reported		Final as of September 30, 2016		As Originally Reported		Final as of December 31, 2016		As Originally Reported		Final as of December 31, 2016
Cash and cash equivalents	$	1,317	$	1,317	$	1,727	$	1,727	$	3,044	$	3,044
Accounts receivable and other current assets	3,920		3,920		10,600		9,934		14,520		13,854
Property and equipment and other long-term assets	230		230		1,665		1,600		1,895		1,830
Deferred tax assets	—		—		4,996		5,722		4,996		5,722
Acquired intangible assets	1,500		2,800		10,000		22,700		11,500		25,500
Goodwill	23,822		23,794		33,815		24,454		57,637		48,248
Total assets acquired	30,789		32,061		62,803		66,137		93,592		98,198
Accounts payable and accrued expenses	871		871		3,087		2,760		3,958		3,631
Bank loans and other long-term liabilities	—		—		—		295		—		295
Deferred revenue	50		50		1,049		1,049		1,099		1,099
Due to employees	596		596		3,010		2,342		3,606		2,938
Deferred tax liabilities	525		—		3,800		7,974		4,325		7,974
Total liabilities assumed	2,042		1,517		10,946		14,420		12,988		15,937
Net assets acquired	$	28,747	$	30,544	$	51,857	$	51,717	$	80,604	$	82,261

As of December 31, 2016, and during the period since the date of each respective acquisition up through December 31, 2016, or the date purchase accounting was finalized, as applicable, the Company made updates to the initially reported acquired balances and has finalized the valuation of the balances of NavigationArts and AGS. For NavigationArts, finalization of the purchase price allocation included adjustments to intangible assets to reflect the results of ~~Empathy Lab~~a final valuation report as well as certain adjustments made to goodwill and deferred tax liabilities as a result of the 338(h)(10) election to treat the NavigationArts acquisition ~~date. As part~~as an asset purchase for tax purposes, increasing net assets acquired by $1,797. For AGS the Company made adjustments to goodwill, intangible assets, deferred taxes and working capital, resulting in a decrease of $140 to the ~~valuation process, the excess earnings method was used to determine the value~~net assets acquired, as well as reclassified certain liabilities out of ~~customer relationships. Fair values~~accrued expenses into a separate category.

The adjustments identified above did not significantly impact our previously reported net income of ~~trade name~~prior periods and, non-competition agreements were determined using the relief from royalty and discounted earnings methods, respectively. The Company expects approximately $11,470 of tax goodwill amortizable over a 15-year period.as such, prior period amounts have not been retrospectively adjusted.

The following table presents the estimated fair values and useful lives of intangible assets acquired ~~as of December 18, 2012:~~

Weighted Average
Useful Life
(in years)
Amount
Customer relationships 10 $ 6,900
Trade names 5 3,900
Non-competition agreements 4 400
Total $ 11,200

~~Included in consolidated statements of income and comprehensive income for the year ended December 31, 2012 were $545 of revenues and $104 of net income of the acquiree, respectively.~~

Total acquisition-related post-combination compensation expense recognized for the year ended December 31, 2012 was $79 and is presented within selling, general and administrative expenses. Total acquisition-related costs were $81 and are presented within selling, general and administrative expenses for the year ended December 31, 2012, respectively.

~~Pro forma results of operations for the Empathy Lab acquisition completed~~ during the year ended December 31, ~~2012 have not been presented because~~2015:



	NavigationArts			AGS
	Weighted Average Useful Life (in years)	Amount		Weighted Average Useful Life (in years)	Amount
Customer relationships	10	$	2,800	10	$	22,700
Total		$	2,800		$	22,700

2014 Acquisitions

The following table discloses details of purchase price consideration of each of the ~~effects~~2014 acquisitions:



Name of Acquisition	Effective Date of Acquisition	Common Shares		Fair Value of Common Shares				Cash, Net of Working Capital and Other Adjustments				Recorded Earnout Payable				Total Recorded Purchase Price		Maximum Potential Earnout Payable
Name of Acquisition	Effective Date of Acquisition	Issued	Deferred	Issued		Deferred		Paid		Deferred		Cash		Stock		Total Recorded Purchase Price		Maximum Potential Earnout Payable
		(in shares)		(in thousands)
Netsoft	March 5, 2014	—	—	$	—	$	—	$	2,403	$	1,022	$	1,825	$	—	$	5,250	$	1,825
Jointech	April 30, 2014	—	89,552	—		2,788		10,000		4,000		15,000		5,000		36,788		20,000
GGA*	June 6, 2014	—	—	—		—		14,892		—		11,400		—		26,292
Great Fridays	October 31, 2014	—	—	—		—		10,777		—		1,173		—		11,950		1,173
		—	89,552	$	—	$	2,788	$	38,072	$	5,022	$	29,398	$	5,000	$	80,280

* Earn-out for GGA had no maximum limit. The determination period ended as of December 31, 2014.

Common shares issued in connection with acquisitions, if applicable, are valued at closing market prices as of the effective date of the applicable acquisition. The maximum potential earnout payables disclosed in the foregoing table represent the maximum amount of additional consideration that could be paid pursuant to the terms of the purchase agreement for the applicable acquisition. The amounts recorded as earnout payables, which are based upon the estimated future operating results of the acquired businesses within a seven-to-twelve-month period subsequent to the acquisition date, are measured at fair value as of the acquisition ~~were not material, individually~~date and are included on that basis in ~~aggregate with other~~the recorded purchase price consideration in the foregoing table. The Company records any subsequent changes in the fair value of the earnout obligations in its consolidated income from operations. Please see Note 17 for discussion of significant inputs and assumptions relating to the earnout obligations. All earnout obligations for these acquisitions ~~completed by~~have been settled.

Netsoft — On March 5, 2014, the Company ~~during 2012, to the Company’s consolidated results~~completed an acquisition of ~~operations.~~

~~Thoughtcorp, Inc. —~~ ~~On May 23, 2012, the Company acquired~~ substantially all of the assets and assumed certain specific liabilities of ~~Thoughtcorp, Inc.,~~U.S.-based healthcare technology consulting firm Netsoft Holdings LLC and Armenia-based Ozsoft, LLC (collectively, “Netsoft”). As a ~~Toronto-based software solutions provider (“Thoughtcorp”~~result of this transaction, substantially all of the employees of Netsoft, including approximately 40 IT professionals, accepted employment with the Company. In connection with the Netsoft acquisition, the Company agreed to issue 2,289 restricted shares of Company common stock as consideration for future services to key management and employees of Netsoft (the “Netsoft Closing Shares”). The ~~acquisition is intended~~Company agreed to expand the Company’s geographic footprint within North America, and complement its global delivery capabilities with expertise in areas such as agile development, enterprise mobility and business intelligence. In addition, Thoughtcorp brings significant telecommunications expertise, and expands and enhances the Company’s offering within the Banking and Financial Services and Travel and Consumer verticals.

~~The purchase price was comprised~~pay deferred consideration consisting partly of ~~$7,497 paid in cash and 217,274~~9,154 restricted shares of Company common ~~stock with a fair value~~stock. During the first quarter of $3,607 at the acquisition date. Half of these shares were placed in escrow for a period of 18 months as a security for the indemnification obligations of the sellers under the asset purchase agreement. Additionally,2015, the Company issued ~~to the sellers 217,272~~16,349 restricted shares of ~~non-vested (“restricted”)~~Company common stock ~~contingent on their continued employment~~to Netsoft for achieving certain performance targets (collectively with the Netsoft Closing Shares, the “Netsoft Employment Shares”). The Netsoft Employment Shares vest in equal annual installments over a three-year period starting from the date of acquisition. All unvested shares will be forfeited upon termination of services by the Company ~~(Note 14). These shares have~~for cause or by the employee other than for good reason. The Netsoft Employment Shares had an estimated value of ~~$3,607~~$1,017 at the time of grant and were recorded as stock-based compensation expense over an associated service period of three years (Note 14). The acquired goodwill that is deductible for tax purposes was $924 as of the date of the acquisition: this amount excludes additional tax deductible amounts resulting from vesting of the employment shares.

Jointech — On April 30, 2014, the Company acquired all of the outstanding equity of Joint Technology Development Limited, a company organized under the laws of Hong Kong, including its wholly-owned subsidiaries Jointech Software (Shenzhen) Co., Ltd., a company organized under the laws of China, and Jointech Software Pte. Ltd., a company organized under the laws of Singapore (collectively, “Jointech”). Jointech provides strategic technology services to multi-national organizations in investment banking, wealth and asset management. As a result of this transaction, substantially all employees of Jointech, including approximately 216 IT professionals, accepted employment with the Company. In connection with the Jointech acquisition, the Company issued 89,552 shares of the Company common stock to a former owner of Jointech as consideration for future services on or about the six-month anniversary from the date of acquisition (the “Jointech Closing Shares”). Furthermore, during the second quarter of 2015, the Company issued 83,057 restricted shares of Company common stock to Jointech for achieving certain performance targets (collectively with the Jointech Closing Shares, the “Jointech Employment Shares”). The Jointech Employment Shares vest in equal annual installments over a three-year period starting from the date of acquisition.

All unvested Jointech Employment Shares will be forfeited upon termination of services for cause by the Company or other than for good reason (as applicable) by either of the two former owners of the acquired business. The aggregate fair value of the Jointech Employment Shares at the date of grant was $7,788 and will be recorded as stock-based compensation expense over an associated service period of ~~two years. A deferred tax asset has been recognized~~three years (Note 14).

GGA — On June 6, 2014, the Company acquired substantially all of the assets and assumed certain specific liabilities of GGA Software Services, LLC, Institute of Theoretical Chemistry, Inc., and GGA’s Russian affiliate (collectively, “GGA”). Established in 1994, GGA develops scientific informatics applications and content databases; creates state-of-the-art algorithms and models; and delivers IT support, maintenance, and QA services to the world’s leading healthcare and life sciences companies. As a result of this transaction, substantially all employees of GGA, including approximately 329 IT professionals and 126 scientists, accepted employment with the Company. In connection with the GGA acquisition, the Company agreed to issue 262,277 shares of the Company common stock to the former owners of GGA as consideration for future services (the “GGA Closing Shares”). Furthermore, during the ~~tax effect~~second quarter of 2015, the Company issued 233,753 restricted shares of Company common stock to the former owners of GGA for achieving certain performance targets (collectively with the GGA Closing Shares, the “GGA Employment Shares”). The GGA Employment Shares vest in equal annual installments over a three-year period starting from the date of acquisition. With respect to each former owner, all unvested shares will be forfeited upon either termination of services by the Company for cause or by the employee other than for good reason. The aggregate fair value of the ~~portion~~GGA Employment Shares at the date of grant was $20,655 and will be recorded as stock-based expense over an associated service period of three years (Note 14). The acquired goodwill that is deductible for tax purposes was $7,306 as of the ~~shares that were placed~~date of the acquisition; this amount excludes additional tax deductible amounts resulting from vesting of the employment shares.

Great Fridays — On October 31, 2014, the Company acquired all of the outstanding equity of Great Fridays Limited and its subsidiaries with intent to expand the Company’s product and design service portfolio. Great Fridays Limited, headquartered in ~~escrow.~~

Manchester, UK, with offices in London, San Francisco and New York, focuses on bridging the gap between business and design. The ~~purchase price was allocated~~acquisition of Great Fridays added approximately 50 creative design professionals to the ~~assets acquired based on their related~~Company’s headcount. In connection with the Great Fridays acquisition, the Company agreed to issue 90,864 shares of the Company common stock to the former owners of Great Fridays as consideration for future services (the “Great Fridays Closing Shares”). Furthermore, during the second quarter of 2015, subject to attainment of specified performance targets, the Company issued to the former owners of Great Fridays 10,092 shares of the Company common stock (collectively with Great Fridays Closing Shares, the “GF Employment Shares”). The GF Employment Shares vest in equal annual installments over a three-year period starting from the date of acquisition. With respect to each former owner, all unvested shares will be forfeited upon either termination of services by the Company for cause or by the employee other than for good reason. The aggregate fair ~~values,~~value of the GF Employment Shares at the date of grant was $4,823 and will be recorded as ~~follows:~~stock-based compensation expense over an associated service period of three years (Note 14).

Amount
Cash and cash equivalents $ 1,111
Trade receivables and other current assets 2,484
Property and equipment 92
Deferred tax asset 1,348
Acquired intangible assets 5,296
Goodwill 2,935
Total assets acquired 13,266
Accounts payable and accrued expenses 461
Assumed shareholder and director loans 1,290
Deferred revenue and other liabilities 411
Total liabilities assumed 2,162
Net assets acquired $ 11,104

~~F-16~~

~~Table of Contents~~

The ~~Company performed~~following is a ~~valuation analysis to determine~~summary of the estimated fair values of the net assets acquired at the date of each respective acquisition during the year ended December 31, 2014 as originally reported in the quarterly condensed consolidated financial statements and at December 31, 2015:



	Netsoft				Jointech				GGA				Great Fridays				Total
	As Originally Reported		Final as of March 31, 2015		As Originally Reported		Final as of June 30, 2015		As Originally Reported		Final as of June 30, 2015		As Originally Reported		Final as of December 31, 2015		As Originally Reported		Final as of December 31, 2015
Cash and cash equivalents	$	—	$	—	$	871	$	871	$	—	$	—	$	259	$	259	$	1,130	$	1,130
Trade receivables and other current assets	788		788		784		784		5,157		5,377		1,825		1,825		8,554		8,774
Property and equipment and other long-term assets	52		52		338		338		444		306		262		262		1,096		958
Deferred tax assets	351		—		—		—		4,463		—		—		—		4,814		—
Acquired intangible assets	1,700		1,700		25,744		15,312		10,959		16,000		5,747		200		44,150		33,212
Goodwill	2,776		2,779		11,033		23,758		6,496		7,306		6,947		11,262		27,252		45,105
Total assets acquired	5,667		5,319		38,770		41,063		27,519		28,989		15,040		13,808		86,996		89,179
Accounts payable and accrued expenses	69		69		728		728		2,593		2,593		872		807		4,262		4,197
Deferred revenue	—		—		—		—		—		104		317		317		317		421
Due to employees	—		—		1,254		1,254		—		—		624		624		1,878		1,878
Deferred tax liabilities	—		—		—		2,293		—		—		1,200		110		1,200		2,403
Total liabilities assumed	69		69		1,982		4,275		2,593		2,697		3,013		1,858		7,657		8,899
Net assets acquired	$	5,598	$	5,250	$	36,788	$	36,788	$	24,926	$	26,292	$	12,027	$	11,950	$	79,339	$	80,280

As of December 31, 2015 the fair values of ~~certain~~the assets acquired and liabilities assumed and the related purchase price allocation for the 2014 acquisitions have been finalized.

As of December 31, 2015, and during the period since the date of each respective acquisition up through December 31, 2015, or the date purchase accounting was finalized, as applicable, the Company made updates to the initially reported acquired balances and has finalized the valuation of the balances of Netsoft, Jointech, GGA and Great Fridays. For Netsoft, the deferred tax assets and goodwill were adjusted decreasing the net assets acquired by $348. For Jointech, intangible assets were adjusted to reflect the final fair value of ~~Thoughtcorp as~~intangible assets acquired and a deferred tax liability was established, both increasing goodwill with no change to the net assets acquired. For GGA, the final working capital adjustment was completed, deferred tax assets were netted with additional recognized deferred tax liabilities and additional accounts receivable and deferred revenue were recognized. In addition, intangible assets and property and equipment were adjusted to reflect the final fair value of the ~~acquisition date. As part of~~assets acquired. These adjustments resulted in an overall increase to goodwill and increased the ~~valuation process, the excess earnings method was used to determine~~net assets acquired by $1,366. For Great Fridays, the value of ~~customer relationships. Fair values~~the intangible assets and associated deferred tax liabilities were reduced based on the final fair value estimates of ~~trade name~~acquired intangible assets, which increased goodwill. These adjustments resulted in a decrease in net assets acquired by $77.

The adjustments identified above did not significantly impact our previously reported net income of prior periods and, non-competition agreements were determined using the relief from royalty and discounted earnings methods, respectively. The Company expects approximately $8,310 of tax goodwill, of which 75% is deductible at 7% per annum on a declining basis.as such, prior period amounts have not been retrospectively adjusted.

The following table presents the estimated fair values and useful lives of intangible assets acquired ~~as of May 23, 2012:~~

Weighted Average
Useful Life
(in years)
Amount
Customer relationships 10 $ 2,810
Trade names 5 2,014
Non-competition agreements 5 472
Total $ 5,296

~~Included in consolidated statements of income for the year ended December 31, 2012 were $7,184 of revenues and $206 of net losses of the acquiree, respectively.~~

Total acquisition-related post-combination compensation expense recognized for the year ended December 31, 2012 was $1,252 and is presented within selling, general and administrative expenses. Total acquisition-related costs were $420 and are presented within selling, general and administrative expenses for the year ended December 31, 2012, respectively.

~~Pro forma results of operations for the Thoughtcorp acquisition completed~~ during the year ended December 31, ~~2012~~2014:



	Netsoft			Jointech			GGA			Great Fridays
	Weighted Average Useful Life (in years)	Amount		Weighted Average Useful Life (in years)	Amount		Weighted Average Useful Life (in years)	Amount		Weighted Average Useful Life (in years)	Amount
Customer relationships	10	$	1,700	10	$	15,000	10	$	16,000	3	$	200
Trade names	—	—		2	312		—	—		—	—
Total		$	1,700		$	15,312		$	16,000		$	200

As of December 31, 2016, the companies acquired during 2015 and 2014 have ~~not~~ been ~~presented because the effects of the acquisition, individually and in aggregate with other acquisitions completed by~~significantly integrated into the Company ~~during 2012, were~~and as such, it is not ~~material~~possible to ~~the Company’s consolidated~~precisely report their individual post-acquisition results of operations.

3.	~~GOODWILL AND INTANGIBLE ASSETS — NET~~

4.GOODWILL AND INTANGIBLE ASSETS — NET

Goodwill by reportable segment was as follows:

North America EU Russia Other Total
Balance as of January 1, 2012 $ 2,286 $ 2,864 $ 3,019 $ — $ 8,169
Acquisition of Thoughtcorp (Note 2) 2,935 — — — 2,935
Acquisition of Empathy Lab (Note 2) 11,359 — — — 11,359
Effect of net foreign currency exchange rate changes 63 — 172 — 235
Balance as of December 31, 2012 16,643 2,864 3,191 — 22,698
Effect of net foreign currency exchange rate changes (205 ) — (225 ) — (430 )
Balance as of December 31, 2013 $ 16,438 $ 2,864 $ 2,966 $ — $ 22,268



	North America			Europe			Total
Balance as of January 1, 2015	$	31,078		$	26,339		$	57,417
Acquisition of NavigationArts (Note 3)	23,822			—			23,822
Acquisition of AGS (Note 3)	33,815			—			33,815
Netsoft purchase accounting adjustment (Note 3)	30			—			30
Jointech purchase accounting adjustment (Note 3)	—			6,181			6,181
GGA purchase accounting adjustment (Note 3)	(4,807		)	—			(4,807		)
Great Fridays purchase accounting adjustment (Note 3)	—			4,315			4,315
NavigationArts purchase accounting adjustment (Note 3)	(2,058		)	—			(2,058		)
Effect of net foreign currency exchange rate changes	(416		)	(2,369		)	(2,785		)
Balance as of December 31, 2015	81,464			34,466			115,930
NavigationArts purchase accounting adjustment (Note 3)	2,030			—			2,030
AGS purchase accounting adjustment (Note 3)	(9,361		)	—			(9,361		)
Other acquisitions	2,404			177			2,581
Other acquisitions purchase accounting adjustment	395			87			482
Effect of net foreign currency exchange rate changes	(120		)	(2,253		)	(2,373		)
Balance as of December 31, 2016	$	76,812		$	32,477		$	109,289

Excluded from the table above are the Russia and Other segments.

The Company performed an annual goodwill impairment test as of October 31, 2014 in accordance with ASC No. 350, “Intangibles-Goodwill and Other.” In assessing impairment both qualitatively and quantitatively based on the total of the expected future discounted cash flows directly related to the Russia reporting unit, the Company determined that the fair value of the reporting unit was below the carrying value of the reporting unit. The Company completed the second step of the goodwill impairment test, resulting in an impairment charge of $2,241 in the Russia segment. As of December 31, 2016 and 2015 the book value of the goodwill related to the Russia segment was zero. All existing assets that related to the Russia segment, excluding goodwill, were assessed by management and deemed to not be impaired.

As a result of an operating loss in the Other reporting unit for the three months ended June 30, 2011, the Company performed a goodwill impairment test. In assessing impairment in accordance with ~~Accounting Standards Codification, (“ASC”)~~ASC No. 350, “Intangibles-Goodwill and Other,” the Company determined that the fair value of the Other reporting unit, based on the total of the expected future discounted cash flows directly related to the reporting unit, was below the carrying value of the reporting unit. The Company completed the second step of the goodwill impairment test, resulting in an impairment charge of ~~$1,697. The~~re$1,697 in the Other reportable segment. As of December 31, 2016, and 2015 the book value of the goodwill related to the Other segment was zero.

There were no accumulated impairments losses in ~~any of~~ the North America or Europe ~~or Russia~~reportable segments as of December 31, ~~2013, 2012~~2016, 2015 or ~~2011.~~2014.

As part of the ~~Thoughtcorp acquisition,~~AGS and NavigationArts acquisitions in 2015, substantially all of the employees of these companies continued employment. The Company believes the ~~acquiree~~amount of goodwill resulting from the allocation of the purchase price to acquire each of the businesses is attributable to the workforce of the acquired businesses. All of the goodwill was allocated to the Company’s U.S. operations and is presented within the North America segment.

As part of the Jointech acquisition in 2014, substantially all of the employees of Jointech continued employment. The Company believes the amount of goodwill resulting from the allocation of purchase price to acquire Jointech is attributable to the workforce of the acquired business. Based on the determination of the reportable units, Jointech has been placed in the Europe reportable unit based on managerial responsibility and consistent with segment reporting. All of the goodwill was allocated to the Company’s UK operations and is presented within the Europe segment.

As part of the Netsoft, GGA and Great Fridays acquisitions in 2014, substantially all of the employees of these companies accepted employment with the Company. The Company believes the amount of goodwill resulting from the allocation of purchase price to acquire ~~Thoughtcorp~~each of the businesses is attributable to the workforce of the acquired ~~business. All of the goodwill was allocated to the Company’s Canadian operations and is presented within North America.~~

As part of the Empathy Lab acquisition, substantially all of the employees of the acquiree accepted employment with the Company. The Company believes the amount of goodwill resulting from the allocation of purchase price to acquire Empathy Lab is attributable to the workforce of the acquired business.businesses. All of the goodwill was allocated to the Company’s U.S. operations and is presented within North America.

~~F-17~~

~~Table of Contents~~

~~Components of intangible~~Intangible assets other than goodwill for the years ended December 31, 2016 and 2015 were as follows:

2013

Weighted average
life at acquisition
(in years)

Gross
carrying
amount

Accumulated
amortization

Net carrying
amount
Client relationships 9 $ 13,432 $ (4,885 ) $ 8,547
Trade name 5 6,232 (1,643 ) 4,589
Non-competition agreements 5 848 (250 ) 598
Total $ 20,512 $ (6,778 ) $ 13,734

	2012
	Weighted average life at acquisition (in years)		Gross carrying amount		Accumulated amortization			Net carrying amount
Client relationships		9	$	13,724	$	(3,640	)	$	10,084
Trade name		5		6,372		(439	)		5,933
										As of December 31, 2016
										Weighted average life at acquisition (in years)	Gross carrying amount		Accumulated amortization			Net carrying amount
Customer relationships										10	$	65,409	$	(15,133	)	$	50,276
Trade names										5	5,622		(4,661		)	961
Non-competition agreements		5		881		(64	)		817	4	756		(733		)	23
Total			$	20,977	$	(4,143	)	$	16,834		$	71,787	$	(20,527	)	$	51,260



	As of December 31, 2015
	Weighted average life at acquisition (in years)	Gross carrying amount		Accumulated amortization			Net carrying amount
Customer relationships	10	$	52,974	$	(8,387	)	$	44,587
Trade names	5	5,853		(3,772		)	2,081
Non-competition agreements	4	746		(554		)	192
Total		$	59,573	$	(12,713	)	$	46,860

All of the intangible assets have finite lives and as such are subject to amortization. ~~Amortization~~Recognized amortization expense for each of ~~intangibles for~~ the years ended December 31 is presented in the table below:

Year Ended December 31,
2013 2012 2011
Client relationships $ 1,373 $ 627 $ 720
Trade name 1,222 333 59
Non-competition agreements 190 64 —
Total $ 2,785 $ 1,024 $ 779



	For the Years Ended December 31,
	2016		2015		2014
Customer relationships	$	6,858	$	3,961	$	3,843
Trade names	1,139		1,280		1,319
Non-competition agreements	173		175		187
Total	$	8,170	$	5,416	$	5,349

Estimated amortization ~~expenses of~~expense related to the Company’s existing intangible assets for the next five years ending December 31 ~~were~~was as follows:

	Amount
2014	$	2,503
2015		2,376
2016		2,341

			Amount
2017		1,865	$	7,482
2018		977	6,539
2019			6,539
2020			6,539
2021			6,539
Thereafter		3,672	17,622
Total	$	13,734	$	51,260

45..PREPAID AND OTHER ~~CURRENT~~ ASSETS

Prepaid and other ~~current~~ assets consisted of the following:


	December 31, 2013		December 31, 2012		December 31, 2016		December 31, 2015
Taxes receivable	$	7,295	$	4,522	$	6,054	$	7,954
Prepaid expenses		3,399		3,825	5,462		4,693
Unamortized software licenses and subscriptions					1,550		699
Security deposits under operating leases		1,005		837	1,323		575
Prepaid equipment		986		1,695
Unamortized software licenses and subscriptions		981		616
Due from employees		218		104
Other		471		236
Notes receivable, net of allowance of $580 and $0, respectively					710		—
Other, net of allowance of $64 and $0, respectively					591		423
Total	$	14,355	$	11,835	$	15,690	$	14,344

~~F-18~~

~~Table of Contents~~

5.~~EMPLOYEE LOANS AND ALLOWANCE FOR LOAN LOSSES~~


6.	EMPLOYEE LOANS AND ALLOWANCE FOR LOAN LOSSES

In ~~the third quarter of~~ 2012, the Board of Directors of the Company approved the Employee Housing Program ~~(“the Housing~~(the “Housing Program”), which ~~assists~~provides employees ~~in purchasing~~with loans to purchase housing in Belarus. The housing is sold directly to employees by independent third parties. The Housing Program was designed ~~to be~~as a retention mechanism for the Company’s employees in Belarus and is available to full-time qualified employees who have been with the Company for at least three years. ~~As part~~The aggregate maximum lending limit of the ~~Housing Program, the Company will extend financing to employees up to an aggregate amount of $10,000. The Company does not bear any market risk in connection~~program is $10,000, with ~~the Housing Program, as the housing will be sold directly to employees by independent third parties.~~no individual outstanding loans exceeding $50. In addition to the housing loans, the Company issues relocation loans in connection with intra-company transfers, as well as certain other individual loans.

During the year ended December 31, ~~2013,~~2016, loans issued by the Company under the Housing Program were denominated in U.S. Dollars with a ~~five-year~~5-year term and carried an interest rate of 7.5%.

At December 31, ~~2013~~2016 and December 31, ~~2012,~~2015, categories of employee loans included in the loan portfolio were as follows:


	December 31, 2013		December 31, 2012		December 31, 2016		December 31, 2015
Housing loans	$	5,896	$	—	$	5,448	$	5,654
Relocation and other loans		494		429	530		684
Total employee loans		6,390		429	5,978		6,338
Less:
Allowance for loan losses		—		—	—		—
Total loans, net of allowance for loan losses	$	6,390	$	429	$	5,978	$	6,338

During the years ended December 31, 2016 and 2015, the Company issued a total of $2,960 and $3,427 of loans to its employees, respectively, and received $3,273 and $3,547 in loan repayments during the same periods, respectively. No loans were written-off during the year ended December 31, 2016. There was one loan written-off during the year ended December 31, 2015.

There were no loans issued to principal officers, directors, ~~and~~or their affiliates during the years ended December 31, ~~2013, 2012~~2016, 2015 and ~~2011.~~2014.

On a quarterly basis, the Company reviews the aging of its loan portfolio ~~to evaluate information about~~and evaluates the ability of employees to ~~service~~repay their debt ~~including~~on schedule. Factors considered in the review include historical payment experience, reasons for payment delays and shortfalls, if any, as well as probability of collecting scheduled principal and interest ~~payments based on the knowledge of individual borrowers, among other factors.~~

payments. As of December 31, ~~2013~~2016 and December 31, ~~2012,~~2015, there were no material past due or non-accrual employee loans. The Company determined no allowance for loan losses was required regarding its employee loans as of December 31, ~~2013~~2016 and December 31, ~~2012,~~2015 and there were no movements in the provision for loan losses during the years ended December 31, ~~2013, 2012~~2016, 2015 and ~~2011.~~

6.~~RESTRICTED CASH AND TIME DEPOSITS~~2014.


7.	RESTRICTED CASH AND TIME DEPOSITS

Restricted cash and time deposits consisted of the following:

December 31,
2013

December 31,
2012
Time deposits $ 1,188 $ 1,006
Short-term security deposits under customer contracts 298 660
Long-term deposits under employee loan programs 225 360
Long-term deposits under operating leases — 107
Total $ 1,711 $ 2,133



	December 31, 2016		December 31, 2015
Restricted cash, short-term	$	2,400	$	—
Time deposits	403		30,181
Other long-term security deposits	239		238
Total	$	3,042	$	30,419

~~Included in time deposits as~~As of December 31, ~~2013, was~~2015 time deposits consisted of a bank deposit of ~~$1,188. The deposit matures on October 15, 2014 and earns~~$30,181, earning interest at the rate of ~~2.05%. The Company does not intend to withdraw~~0.74% placed with the ~~deposit prior to its maturity.~~

~~Included~~Company’s Cyprus entity’s bank accounts in ~~time deposits as of December 31, 2012, was a bank deposit of $1,006, which earned interest at~~ the ~~rate of 2.95%.~~United Kingdom. The deposit matured ~~in September 2013.~~on March 11, 2016.

At December 31, 2013 and 2012 short-term security deposits under customer contracts included fixed amounts placed in connection with bank guarantees to secure appropriate performance by the Company. The Company estimates the probability of non-performance under these contracts as remote therefore, no provision for losses has been recognized in respect of these amounts as of December 31, 2013 and 2012.

~~Also included in restricted cash as of December 31, 2013 and 2012 were deposits of $225 and $360, respectively, placed in connection with certain employee loan programs (See Note 16).~~

~~F-19~~

~~Table of Contents~~


8.	PROPERTY AND EQUIPMENT — NET

7.~~PROPERTY AND EQUIPMENT — NET~~

Property and equipment consisted of the following:


	Useful Life (in years)		December 31, 2013			December 31, 2012			Weighted Average Useful Life (in years)	December 31, 2016			December 31, 2015
Computer hardware		3	$	29,884		$	24,239		3	$	49,599		$	36,612
Building									49	34,012			34,002
Furniture and fixtures									7	13,178			8,990
Office equipment									7	9,416			8,307
Leasehold improvements	lease term			5,903			5,527		4	7,944			6,801
Furniture and fixtures		7		5,688			4,351
Purchased computer software		3		5,042			4,452		5	4,601			4,099
Office equipment		7		4,679			4,325
Building		50		16,534			16,534
Construction in progress (Note 16)		n/a		15,749			15,561
Land improvements									20	1,467			1,464
				83,479			74,989			120,217			100,275
Less accumulated depreciation and amortization				(30,164	)		(21,854	)		(46,601		)	(39,776		)
Total			$	53,315		$	53,135			$	73,616		$	60,499

For the leasehold improvements, the useful life is determined based on the shorter of the lease term or useful life of the underlying asset.

Depreciation and amortization expense related to property and equipment was ~~$12,335, $9,858~~$15,217, $11,979 and ~~$6,759~~$12,134 for the years ended December 31, ~~2013, 2012~~2016, 2015 and ~~2011,~~2014, respectively.

8.
9.	ACCRUED EXPENSES AND OTHER LIABILITIES

Accrued expenses and other liabilities consisted of the following:



	December 31, 2016		December 31, 2015
Compensation	$	33,404	$	47,285
Deferred revenue	3,319		3,047
Subcontractor costs	3,317		4,360
Professional fees	2,348		2,251
Business trips	2,324		939
Facilities costs	1,534		1,538
Insurance costs	1,091		810
Acquisition related deferred consideration	—		603
Deferred tax liabilities	—		365
Other	2,558		2,598
Total	$	49,895	$	63,796

December 31,
2013

December 31,
2012
Compensation $ 13,674 $ 15,450
Subcontractor costs 2,933 1,915
Professional fees 947 544
Facilities costs 334 297
Other 2,287 1,608
Total $ 20,175 $ 19,814

9.
10.	TAXES PAYABLE

Current taxes payable consisted of the following:


	December 31, 2013		December 31, 2012		December 31, 2016		December 31, 2015
Corporate profit tax	$	3,717	$	3,315	$	4,000	$	15,057
Value added taxes		5,975		6,274	10,644		8,553
Payroll, social security, and other taxes		4,479		4,968	10,364		5,862
Total	$	14,171	$	14,557	$	25,008	$	29,472

AsThere were no long-term taxes payable as of December 31, ~~2013~~2016 and ~~2012, long-term taxes payable included amounts in respect of unrecognized tax benefits and related interest.~~2015.


11.	INCOME TAXES

10.~~INCOME TAXES~~

Income before provision for income taxes ~~shown below was~~included income from domestic operations and income from foreign operations based on ~~the~~ geographic location ~~to which such~~as disclosed in the table below:



	For the Years Ended December 31,
	2016			2015			2014
Income/ (loss) before income tax expense:
Domestic	$	(9,300	)	$	(7,687	)	$	(7,229	)
Foreign	135,766			113,757			94,182
Total	$	126,466		$	106,070		$	86,953

The provision for income ~~was attributed as follows:~~taxes consists of the following:

Year Ended December 31,
2013 2012 2011
Income before income tax expense:

Domestic $ 7,001 $ 9,291 $ 2,872
Foreign 69,769 56,572 49,920
Total $ 76,770 65,863 $ 52,792

~~F-20~~

~~Table of Contents~~

	Year Ended December 31,
	2013			2012			2011
Income tax expense/ (benefit) consists of:
										For the Years Ended December 31,
										2016			2015			2014
Income tax expense (benefit) consists of:
Current
Federal	$	6,150		$	6,881		$	4,878		$	13,324		$	19,851		$	7,741
State		310			319			389		(63		)	2,563			338
Foreign		8,275			7,969			2,483		17,243			14,528			12,504
Deferred
Federal		(668	)		(625	)		(1,629	)	(3,581		)	(13,361		)	(3,979		)
State		14			24			(72	)	312			(1,891		)	(43		)
Foreign		695			(3,189	)		2,390		(35		)	(76		)	751
Total	$	14,776		$	11,379		$	8,439		$	27,200		$	21,614		$	17,312

Deferred ~~tax assets and liabilities are provided for~~Income Taxes

Deferred income taxes reflect the net effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax ~~basis of an asset and liability and its reported amount in the consolidated balance sheets. These temporary differences result in taxable or deductible amounts in future years.~~

~~The~~purposes. Significant components of the Company’s deferred tax assets and liabilities ~~were~~are as follows:


	December 31, 2013		December 31, 2012			December 31, 2016		December 31, 2015
Deferred tax assets:
Fixed assets	$	732	$	703
Property and equipment						$	203	$	681
Intangible assets		4,532		4,737		1,525		1,428
Accrued expenses		3,488		4,042		9,172		10,729
Net operating loss carryforward						5,368		5,233
Deferred revenue		2,050		1,583		1,165		2,162
Stock-based compensation		407		413		19,701		12,484
Valuation allowance		—		(489	)
Restricted stock options		1,336		1,616
Other assets		680		1,214		17		14
Deferred tax assets		13,225		13,819		37,151		32,731
Deferred tax liabilities:
Fixed assets		804		742
Property and equipment						1,735		646
Intangible assets						4,969		1,598
Accrued revenue and expenses		846		737		500		511
Deferred intercompany gain		405		405
Equity compensation		1,593		2,431
Stock-based compensation						1,606		1,672
Other liabilities		254		—		314		912
Deferred tax liability		3,902		4,315
Net deferred tax asset	$	9,323	$	9,504
Deferred tax liabilities						9,124		5,339
Net deferred tax assets						$	28,027	$	27,392

Included in the stock-based compensation expense deferred tax asset at December 31, 2016 and 2015 is $11,471 and $7,219, respectively that is related to acquisitions and is amortized for tax purposes over a 15-year period.

We have income tax net operating loss (“NOL”) carryforwards related to several jurisdictions of $20,899. We have recorded a deferred tax asset of $5,368 reflecting the full benefit of $20,899 in loss carryforwards as we fully expect to utilize all NOLs before each country’s expiration period.

Adoption of ASU 2015-17 resulted in the classification of current deferred tax assets and liabilities to non-current deferred tax assets and liabilities. As such the Company has no current deferred tax assets and liabilities as of December 31, 2016. As of December 31, 2016, the Company had non-current deferred tax assets and liabilities of $31,005 and $2,979, respectively. At December 31, ~~2013,~~2015, the Company had current and non-current deferred tax assets of ~~$5,392~~$11,847 and ~~$4,557,~~$18,312, respectively, and current and non-current deferred tax liabilities of ~~$275~~$365 and ~~$351,~~$2,402, respectively. ~~At December 31, 2012, the Company had current~~Current and non-current deferred tax ~~assets of $6,593 and $6,093, respectively and~~liabilities were shown under other current and ~~non-current tax~~long-term liabilities ~~of $491 and $2,691, respectively.~~on the consolidated balance sheets.

Management assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to use the existing deferred tax assets. A significant piece of objective negative evidence evaluated was the amount of tax holiday the company can use in Hungary before the credit expires in that jurisdiction in 2015. Such objective evidence limits the ability to consider other subjective evidence such as our projections for future growth.

On the basis of this evaluation, as of December 31, 2013, no valuation allowance is required to record the portion of the deferred tax asset that is more likely than not to be realized. The amount of the deferred tax asset considered realizable, however, could be adjusted if estimates of future taxable income during the carryforward period are reduced or increased or if objective negative evidence in the form of cumulative losses is no longer present and additional weight may be given to subjective evidence such as our projections for growth.

~~At December 31, 2013, the Company had utilized all of its federal net operating losses.~~ No provision has been made for U.S. or non-U.S. income taxes on the undistributed earnings of subsidiaries or for unrecognized deferred tax liabilities for temporary differences related to basis differences in investments in subsidiaries, as such earnings are expected to be permanently reinvested, the

~~F-21~~

~~Table of Contents~~

investments are essentially permanent in duration, or the Company has concluded that no additional tax liability will arise as a result of the distribution of such earnings. As of December 31, ~~2013,~~2016, certain subsidiaries had approximately ~~$249.6~~$571.4 million of undistributed earnings that we intend to permanently reinvest. A liability could arise if our intention to permanently reinvest such earnings were to change and amounts are distributed by such subsidiaries or if such subsidiaries are ultimately disposed. It is not practicable to estimate the additional income taxes related to permanently reinvested earnings or the basis differences related to investments in subsidiaries.

The ~~provision for income taxes differs from~~reconciliation of the ~~amount of income tax determined by applying the applicable US~~federal statutory ~~federal~~ income tax rate to ~~pretax~~our effective income tax rate is as follows:

Year Ended December 31,
2013 2012 2011
Statutory federal tax $ 26,102 $ 22,393 $ 18,482
Increase/ (decrease) in taxes resulting from:
State taxes, net of federal benefit 368 280 266
Provision adjustment for current year uncertain tax position — — 178
Effect of permanent differences 2,524 2,177 2,816
Stock-based compensation 1,948 1,165 —
Rate differential between U.S. and foreign (17,279 ) (14,472 ) (13,297 )
Change in foreign tax rate (59 ) 148 (22 )
Change in valuation allowance 489 (489 ) —
Other 683 177 16
Income tax expense $ 14,776 $ 11,379 $ 8,439

~~The growth in the permanent differences in the year ended December 31, 2012 related to goodwill impairment loss and increases in non-deductible expenses incurred by foreign subsidiaries.~~



	For the Years Ended December 31,
	2016			2015			2014
Statutory federal tax	$	44,263		$	37,125		$	29,564
Increase/ (decrease) in taxes resulting from:
State taxes, net of federal benefit	1,192			341			311
Provision adjustment for current year uncertain tax position	—			—			(1,220		)
Effect of permanent differences	5,042			7,314			8,589
Stock-based compensationexpense	9,535			7,591			3,782
Foreign tax expense and tax rate differential	(33,477		)	(31,094		)	(24,772		)
Change in foreign tax rate	—			9			754
Change in valuation allowance	—			—			149
Other	645			328			155
Provision for income taxes	$	27,200		$	21,614		$	17,312

On September 22, 2005, the president of Belarus signed the decree “On the High-Technologies Park” (the “Decree”). The Decree is aimed at boosting the country’s high-technology sector. The Decree stipulates that member technology companies have a 100% exemption from Belarusian income tax of 18% effective July 1, ~~2006. The Decree is in effect~~2006, for a period of 15 ~~years from date of signing.~~

The Company’s subsidiary in Hungary benefits from a tax credit of 10% of annual qualified salaries, taken over a four-year period, for up to 70% of the total tax due for that period. The Company has been able to take the full 70% credit for 2008 - 2013. The Hungarian tax authorities repealed the tax credit beginning with 2012. Credits earned in years prior to 2012, will be allowed until fully utilized. The Company anticipates full utilization up to the 70% limit until 2014, with full phase out in 2015.

years. The aggregate dollar benefits derived from ~~these~~this tax ~~holidays~~holiday approximated ~~$9.7~~$13.6 million, ~~$8.5~~$20.8 million and ~~$21.0~~$16.8 million for the years ended December 31, ~~2013, 2012~~2016, 2015 and ~~2011,~~2014, respectively. ~~The decrease in aggregate dollar benefits derived from these tax holidays in 2013, as compared to 2012, was primarily due to a decrease in statutory tax rate in Belarus.~~ The benefit the tax holiday had on diluted net income per share approximated ~~$0.20, $0.19~~$0.26, $0.40 and ~~$0.49~~$0.34 for the years ended December 31, ~~2013, 2012~~2016, 2015 and ~~2011,~~2014, respectively.

Uncertain Tax Positions

The liability for unrecognized tax benefits is included in ~~income tax liability~~taxes payable within the consolidated balance sheets at December 31, ~~2013~~2016 and ~~2012.~~2015. At December 31, ~~2013~~2016 and ~~2012,~~2015, the total amount of gross unrecognized tax benefits (excluding the federal benefit received from state tax positions) was ~~$1,271~~$66 and ~~$1,271, respectively, (excluding penalties and interest of $189 and $125, respectively). Of this total, $1,328 and $1,354, respectively, (net of the federal benefit on state tax issues) represents~~$62, respectively. These amounts represent the amount of unrecognized tax benefits that, if recognized, would favorably affect the effective tax rate in future periods.

The Company’s policy is to recognize interest and penalties related to uncertain tax positions as a component of its provision for income taxes. There was no accrued interest and penalties resulting from such unrecognized tax benefits at December 31, 2016 and December 31, 2015. The total amount of accrued interest and penalties resulting from such unrecognized tax benefits was ~~$189, $125 and $55~~$12 at December 31, ~~2013, 2012 and 2011, respectively.~~2014.

The beginning to ending reconciliation of the gross unrecognized tax benefits ~~were~~is as follows:

2013 2012 2011
Gross Balance at January 1 $ 1,271 $ 1,271 $ 56
Increases in tax positions in current year — — 178
Increases in tax positions in prior year — — 1,093
Decreases due to settlement — — (56 )
Balance at December 31 $ 1,271 $ 1,271 $ 1,271

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	For the Years Ended December 31,
	2016		2015			2014
Balance at January 1	$	62	$	200		$	1,271
Increases in tax positions in current year	4		—			—
Increases in tax positions in prior year	—		—			—
Decreases due to settlement	—		(138		)	(1,071		)
Balance at December 31	$	66	$	62		$	200

There were no tax positions for which it was reasonably possible that unrecognized tax benefits will significantly increase or decrease within 12twelve months of the reporting date.

The Company files income tax returns in the United States and in various ~~states,~~state, local and foreign jurisdictions. The Company’s significant tax jurisdictions are the ~~U.S. Federal, Pennsylvania,~~United States, Canada, Russia, Denmark, Germany, Ukraine, the United Kingdom, Hungary, Switzerland, and ~~Kazakhstan.~~India. The tax years subsequent to ~~2009~~2012 remain open to examination by the Internal Revenue ~~Service. Generally,~~Service and generally, the tax years subsequent to ~~2009~~2012 remain open to examination by various state and local taxing authorities and various foreign taxing authorities.

~~11.EMPLOYEE BENEFITS~~


12.	EMPLOYEE BENEFITS

The Company ~~has established~~offers employees a 401(k) retirement plan, which is a tax-qualified self-funded retirement plan covering substantially all of the Company’s U.S. employees. Under this plan, employees may elect to defer their current compensation by up to the statutory ~~limit. Effective January 1, 2013,~~limit defined by the Internal Revenue Service. The Company provides discretionary matching contributions to the plan of up to a maximum of 2.0% of the employee’s eligible ~~compensation.~~compensation as defined by the plan. Employer contributions are subject to a two year vesting schedule. Employer contributions charged to expense for the ~~year~~years ended December 31, ~~2013~~2016, 2015 and 2014, were ~~$404.~~ $1,934, $740 and $549, respectively.

The Company does not maintain any defined benefit pension plans or any nonqualified deferred compensation plans.

~~12.LONG-TERM DEBT~~


13.	DEBT

Revolving Line of Credit — ~~In November 2006,~~On September 12, 2014, the Company entered into a revolving loan agreement (the ~~“Credit~~“2014 Credit Facility”) with PNC Bank, National ~~Association (the “Bank”~~Association; Santander Bank, N.A; and Silicon Valley Bank (collectively the “Lenders”). to replace its former revolving loan agreement. The 2014 Credit Facility ~~was comprised~~provides for a borrowing capacity of ~~a five-year revolving line of~~$100,000, with potential to increase the credit ~~pursuant to which the Company could borrow~~facility up to ~~$7,000~~$200,000 if certain conditions are met. The 2014 Credit Facility matures on September 12, 2019.

Borrowings under the 2014 Credit Facility may be denominated in U.S. dollars or up to a maximum of $50,000 in British pounds sterling, Canadian dollars, euros or Swiss francs (or other currencies as may be approved by the lenders). Borrowings under the 2014 Credit Facility bear interest at ~~any point in time~~either a base rate or Euro-rate plus a margin based on ~~borrowing availability at an annual~~the Company’s leverage ratio. Base rate is equal to the ~~London Interbank Offer~~highest of (a) the Federal Funds Open Rate, plus 0.5%, (b) the Prime Rate, or (c) the Daily LIBOR Rate, plus ~~1.25%~~1.0%.

The borrowing availability under the Credit Facility was based upon a percentage of eligible accounts receivable and US cash. On July 25, 2011, the Company and the Bank agreed to amend the Credit Facility to increase the maximum borrowing capacity to $30,000.

On January 15, 2013, the Company entered into a new revolving loan agreement (the “2013 Credit Facility”) with the Bank, which expires on January 15, 2015. Under the new agreement, the Company’s maximum borrowing capacity was set at $40,000. Advances under the new line of credit accrue interest at an annual rate equal to the LIBOR, plus 1.25%. The 20132014 Credit Facility is collateralized with: (a) all tangible and intangible assets of the Company, and its U.S.-based subsidiaries including all accounts, general intangibles, intellectual property rights and equipment; and (b) all of the outstanding shares of capital stock and other equity interests in U.S.-based subsidiaries of the Company, and ~~65.0%~~65% of the outstanding shares of capital stock and other equity interests in certain of the Company’s foreign subsidiaries. The 2014 Credit Facility includes customary business and financial covenants and restricts the Company’s ability to make or pay dividends (other than certain intercompany dividends) unless no potential or actual event of default has occurred or would be triggered. As of December 31, 2016, the Company was in compliance with all covenants contained in the 2014 Credit Facility.

As of December 31, ~~2013,~~2016 and 2015, the outstanding debt of the Company under the 2014 Credit Facility was $25,000 and $35,000 respectively, and is subject to a LIBOR-based interest rate, which resets regularly at issuance, based on lending terms. In addition, as of December 31, 2016, the Company has a $942 unused irrevocable standby letter of credit associated with its insurance program that was issued under the 2014 Credit Facility during the year 2016.

As of December 31, 2016 and 2015, the borrowing capacity of the Company under the ~~2013~~2014 Credit Facility was ~~$40,000.~~$74,058 and $65,000, respectively.

The 2013 Credit Facility contains customary affirmative and negative covenants, including financial and coverage ratios. As of December 31, 2013, the Company was in compliance with all debt covenants as of that date.

~~As of December 31, 2013 and 2012, the Company had no outstanding borrowing.~~

~~13.COMMON AND PREFERRED STOCK~~

On January 19, 2012, the Company effected an 8-for-1 stock split of the Company’s common stock, on which date the number of authorized common and preferred stock was increased to 160,000,000 and 40,000,000 shares, respectively. All shares of common stock, options to purchase common stock and per share information presented in the consolidated financial statements have been adjusted to reflect the stock split on a retroactive basis for all periods presented. There was no change in the par value of the Company’s common stock. The ratio by which the then outstanding shares of Series A-1 Preferred, Series A-2 Preferred and Series A-3 Preferred Stock were convertible into shares of common stock was adjusted to reflect the effects of the common stock split, such that each share of preferred stock was convertible into eight shares of common stock.

In February 2012, the Company completed an initial public offering of 6,900,000 shares of its common stock, which included 900,000 shares of common stock sold by the Company pursuant to an over-allotment option granted to the underwriters, which were sold at a price to the public of $12.00 per share. The offering commenced on February 7, 2012 and closed on February 13, 2012. Of the 6,900,000 shares of common stock sold, the Company issued and sold 2,900,000 shares of common stock and its selling stockholders sold 4,000,000 shares of common stock, resulting in gross proceeds to the Company of $34,800 and $28,969 in net proceeds after deducting underwriting discounts and commissions of $2,436 and offering expenses of $3,395. The Company did not receive any proceeds from the sale of common stock by the selling stockholders.

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On August 20, 2010, the Company entered into an agreement with Instant Information Inc. to issue shares of common stock to Instant Information Inc. as consideration for the acquisition of the assets of Instant Information Inc. subject to achievement of certain financial milestones or upon completion of an initial public offering by the Company. A total of 53,336 shares of common stock were issued to Instant Information Inc. upon completion of the Company’s initial public offering for an aggregate value of $640, which was expensed during the first quarter of 2012.

Upon the closing of the initial public offering, all outstanding Series-A1 and Series-A2 convertible redeemable preferred stock, and Series A3 convertible preferred stock were converted into a total of 21,840,128 shares of common stock, as shown in the table below.

	~~Conversion Shares~~
~~Series A-1 Convertible Redeemable Preferred Stock~~14.		~~16,439,480~~
~~Series A-2 Convertible Redeemable Preferred Stock~~		~~3,078,432~~
~~Series A-3 Convertible Preferred Stock~~		~~2,322,216~~
~~Total~~		~~21,840,128~~	STOCK-BASED COMPENSATION

~~Series A-1 Convertible Redeemable Preferred Stock (“Series A-~~1 ~~Preferred”)~~ — On January 20, 2006, Siguler Guff LLC, a New York based private equity investment firm, acting through its affiliated investment funds Russia Partners II LP (“RPII”) and Russia Partners EPAM Fund LP (“RPE”), purchased 657,354 shares of Series A-1 Preferred at $12.17 per share or $8,000. At the same time, RPII and RPE also acquired 11,180,648 shares of the Company’s common stock from existing holders, and the Company enabled RPII and RPE to convert such shares into 1,397,581 shares of Series A-1 Preferred. The difference between the share price of the Series A-1 Preferred ($12.17 per share) and the common stock ($1.13 per share) exchanged of $6,803 has been recorded as a deemed dividend. The Company accreted the 12.5% compounded annual rate of return through April 15, 2010, in accordance with the redemption provision as detailed below. There was no accretion for the years ended December 31, 2013, 2012 and 2011. The ending redemption value was $41,245 at December 31, 2011.

~~The terms of the Series A-1 Preferred were as follows:~~

~~Dividends~~ ~~— No dividends will be paid on the Series A-1 Preferred unless dividends are paid on common stock.~~

~~Liquidation~~ — Before any payment to the common stockholders, the Series A-1 Preferred will receive their purchase price of the Series A-1 Preferred ($12.17 per share) plus a 12.5% compounded annual rate of return on the purchase price.

If the assets distributable to the holders of the Series A Preferred upon a liquidation are insufficient to pay the full Series A-1, A-2 and A-3 Preferred liquidation amounts, then such assets or the proceeds shall be distributed among the holders of the Series A-1, A-2 and A-3 Preferred ratably in proportion to the respective amount to which they otherwise would be entitled.

~~The liquidation amount is equal to the carrying value for all periods presented.~~

~~Redemption~~ — At any time after January 1, 2011, if the Company has not affected a qualified public offering, as defined, the holders of at least a majority of the then outstanding shares of Series A-1 Preferred, voting together as a separate class, may by written request, require the Company to redeem all or any number of shares of the Series A-1 Preferred in four equal semi-annual installments beginning thirty calendar days from the date of the redemption election and ending on the date one and one-half years after such date. The Company shall affect such redemptions on the applicable redemption date by paying in cash in exchange for each share of Series A-1 Preferred to be redeemed then outstanding an amount equal to the Series A-1 Preferred liquidation amount ($12.17 per share plus a 12.5% compounded annual rate of return) on such redemption date.

Pursuant to section 6.8 of the Series A-3 convertible preferred stock purchase agreement, the 12.5% compounded annual return related to the Series A-1 Preferred, which has been part of the Series A-1 liquidation amount, ceases after the date of issuance of the Series A-3 Preferred. EPAM terminated the accretion related to this liquidation amount on or about April 15, 2010.

~~Voting~~ — Each holder of a share of Series A-1 Preferred shall be entitled to voting rights and powers equal to the voting rights and powers of the common stock (except as otherwise expressly provided or as required by law) voting together with the common stock as a single class on an as-converted to common stock basis. Each share of Series A-1 Preferred (including fractional shares) shall be entitled to one vote for each whole share of common stock that would be issuable upon conversion of such shares on the record date for determining eligibility to participate in the action being taken.

~~Conversion Rights~~ — Any holder of Series A-1 Preferred may convert any share of Series A-1 Preferred held by such holder into a number of shares of common stock determined by dividing (i) the Series A-1 Preferred purchase price ($12.17 per share) by (ii) the Series A-1 conversion price then in effect. The initial conversion price for the Series A-1 Preferred (the “Series A-1 Conversion Price”) shall be equal to the purchase price ($12.17 per share). The Series A-1 Conversion Price from time to time in effect is subject

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to adjustment, as defined. Each share of Series A-1 Preferred shall automatically be converted into shares of common stock at the then effective applicable Series A-1 Conversion Price upon the earliest of (i) the date specified by vote or written consent or agreement of holders of at least a majority of the shares of Series A-1 Preferred then outstanding, (ii) effective immediately before a qualified public offering, as defined, or (iii) effective upon the closing of a liquidation or a reorganization event, as defined, that results in the receipt of a per share amount of cash proceeds or non-cash property valued equal to or greater than the Series A-1 Preferred liquidation amount, as defined.

~~Series A-~~2 ~~Convertible Redeemable Preferred Stock (“Series A-~~2 ~~Preferred”)~~ — On February 19, 2008, the Company completed a private placement and raised net proceeds of $47,601 ($50,000 gross less $2,399 costs) from the sale of 675,081 shares of Series A-2 Preferred at a sale price of $74.07 per share. Annual accretion was $0, $0 and $17,563 for the years ended December 31, 2013, 2012 and 2011, respectively. The ending carrying value was $0, $0 and $44,695 at December 31, 2013, 2012 and 2011, respectively.

In connection with this private placement, the Company designated the Series A-2 Preferred as a new series of preferred stock and renamed the existing series of shares of Series A preferred stock as Series A-1 Preferred.

On January 19, 2010, the Company entered into a stock repurchase agreement with certain stockholders to repurchase 290,277 of Series A-2 Convertible Redeemable Preferred Stock at a per share price of $51.85 for a total consideration of $15,050. On November 10, 2010, Board of Directors of the Company voted to retire these shares.

~~The Series A-2 Preferred shares had the following rights and preferences:~~

~~Dividends~~ ~~— No dividends will be paid on the Series A-2 Preferred unless dividends are paid on common stock.~~

~~Liquidation~~ ~~— Before any payment to the common stockholders, the Series A-2 Preferred holders will receive their liquidation preference.~~

In the event of any liquidation that values 100% of the equity securities of the Company on a fully-diluted basis at an amount that is less than the Series A-2 post-money valuation, as defined, the holders of shares of Series A-2 Preferred shall be entitled to receive either their per share purchase price of the Series A-2 Preferred ($74.07) plus a 12.5% compounded annual rate of return if the purchase price is less than the percentage ceiling amount, defined for purposes of liquidation as 17.1% of cash proceeds or non-cash property received by the Company in the event of any liquidation, or the greater of (1) $74.07 per share and (2) the percentage ceiling amount.

In the event of liquidation that values 100% of the equity securities of the Company on a fully-diluted basis at an amount that is equal to or greater than the Series A-2 post-money valuation, as defined, the holders of shares of Series A-2 Preferred shall be entitled to receive either their per share purchase price of the Series A-2 Preferred ($74.07) plus a 12.5% to 18% compounded annual rate of return on the purchase price, if greater than the percentage ceiling amount, or the percentage ceiling amount.

~~Redemption~~ — At any time before January 1, 2011, if the Company has not effected a qualified public offering, as defined, the holders of at least a majority of the then outstanding shares of Series A-2 Preferred, may, by written request, require the Company to redeem all or any number of shares of the Series A-2 Preferred in three equal installments payable no later than the 12th, 18th and 24th month following the date of the redemption election. The Company shall effect such redemptions on the applicable redemption date by paying in cash in exchange for each shares of Series A-2 Preferred to be redeemed then outstanding, a per share amount equal to the lesser of (x) an amount that would provide a compounded annual return of 12.5% from the date of initial issuance date and (y) the percentage ceiling amount. At any time on or after January 1, 2011, the redemption per share amount is equal to the lesser of (x) the hurdle amount, an amount that would provide an annual IRR, as defined, from the initial issuance date of such share of at least 17%, provided, however, that the hurdle amount, as defined, shall cease to compound after December 31, 2010 and (y) the percentage ceiling amount, as defined. The percentage ceiling amount means, initially, 17.1% and thereafter adjusted pro rata for any changes in the percentage of capital stock of the Company owned by the holders of shares of Series A-2 Preferred (on a fully diluted basis) multiplied by the aggregate value of all Common Stock (assuming conversion of the Series A Preferred) as reasonably determined by the Board in good faith.

~~Voting~~ — Each holder of a Series A-2 Preferred shall be entitled to voting rights and powers equal to the voting rights and powers of common stock (except as otherwise expressly provided or as required by law) voting together with the common stock as a single class on an as-converted to common stock basis. Each share of Series A-2 Preferred (including fractional shares) shall be entitled to one vote for each whole share of common stock that would be issuable upon conversion of such shares on the record date for determining eligibility to participate in the action being taken.

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~~Table of Contents~~

~~Conversion rights~~ — Any holder of Series A-2 Preferred may convert any share of Series A-2 Preferred held by such holder into a number of shares of common stock determined by dividing (i) the Series A-2 Preferred purchase price ($74.07 per share) by (ii) the Series A-2 conversion price then in effect. The initial conversion price for the Series A-2 Preferred (the “Series A-2 Conversion Price”) shall be equal to the purchase price ($74.07 per share). The Series A-2 Conversion Price from time in effect is subject to adjustment, as defined. Each share of Series A-2 Preferred shall automatically be converted into shares of common stock at the then effective applicable Series A-2 Conversion Price upon the earliest of (i) the date specified by vote or written consent or agreement of holders of at least a majority of the shares of Series A-2 Preferred then outstanding, (ii) effective immediately before a qualified public offering, as defined. or (iii) effective upon the closing of a liquidation or a reorganization event, as defined, that results in the receipt per share of amount of cash proceeds or non-cash property valued equal to or greater than, the lesser of (x) their purchase price of the Series A-2 Preferred ($74.07 per share) plus a 12.5% compounded annual rate of return on the purchase price and (y) the percentage ceiling amount, as defined.

~~Registration Rights~~ ~~— The holders of at least majority of the Series A-2 Preferred holders, may, by written request, require the Company to file a registration statement with certain limitations.~~

~~Series A-~~3 ~~Convertible Preferred Stock (“Series A-~~3 ~~Preferred”) —~~ ~~On April 15, 2010, the Company created and issued 290,277 shares of Series A-3 Preferred at $51.85 per share, for a total consideration of $14,971, net of costs.~~

~~The Series A-3 Preferred had the following rights and preferences:~~

~~Dividends~~ ~~— No dividends will be paid on the Series A-3 Preferred unless dividends are paid on common stock.~~

~~Liquidation~~ ~~— Before any payment to the common stockholders, the Series A-3 Preferred holders will receive their liquidation preference.~~

In the event of liquidation that values 100% of the equity securities of the Company on a fully-diluted basis at an amount that is equal to or greater than the Series A-3 liquidation amount, as defined, the holders of shares of Series A-3 Preferred shall be entitled to receive their pro rata portion based on the per share amount available to common stockholders.

~~If the assets distributable to the holders of the Series A Preferred upon a liquidation are insufficient to pay the full Series A-1,~~

A-2 and A-3 Preferred liquidation amounts, then such assets or the proceeds shall be distributed among the holders of the Series A-1, A-2 and A-3 Preferred ratably in proportion to the respective amount to which they otherwise would be entitled.

~~The liquidation amount is equal to the carrying value for all periods presented.~~

~~Voting~~ — Each holder of a Series A-3 Preferred shall be entitled to voting rights and powers equal to the voting rights and powers of common stock (except as otherwise expressly provided or as required by law) voting together with the common stock as a single class on an as-converted to common stock basis. Each share of Series A-3 Preferred (including fractional shares) shall be entitled to one vote for each whole share of common stock that would be issuable upon conversion of such shares on the record date for determining eligibility to participate in the action being taken.

~~Conversion rights~~ — Any holder of Series A-3 Preferred may convert any share of Series A-3 Preferred held by such holder into a number of shares of common stock determined by dividing (i) the Series A-3 Preferred purchase price ($51.85 per share) by (ii) the Series A-3 conversion price then in effect. The initial conversion price for the Series A-3 Preferred (the “Series A-3 Conversion Price”) shall be equal to the purchase price ($51.85 per share). The Series A-3 Conversion Price from time in effect is subject to adjustment, as defined. Each share of Series A-3 Preferred shall automatically be converted into shares of common stock at the then effective applicable Series A-3 Conversion Price upon the earliest of (i) the date specified by vote or written consent or agreement of holders of at least a majority of the shares of Series A-3 Preferred then outstanding, (ii) effective immediately before a qualified public offering, as defined, or (iii) effective upon the closing of a liquidation or a reorganization event, as defined.

~~Registration Rights~~ ~~— The holders of at least a majority of the Series A-3 Preferred holders, may, by written request, require the Company to file a registration statement with certain limitations.~~

~~Puttable Stock~~ — As part of consideration paid in business combinations, the Company issued common stock to certain stockholders of the acquired companies. The shares had an attached Put Option that provided the holders with the right to put the shares at the original per share value in the event the Company did not have a qualified public offering or reorganization event within a specified period from the acquisition date. During 2011, put options in respect of 56,896 of puttable common stock expired unexecuted.

~~Treasury Stock~~ — During the years ended December 31, 2013 and 2012, the Company issued treasury stock in connections with acquisitions completed in 2012 (See Note 2). In addition, in May 2012, Board of Directors of the Company voted to retire 38,792 shares of its treasury stock.

~~F-26~~

~~Table of Contents~~

~~14.STOCK COMPENSATION~~

The following costs related to the Company’s stock compensation plans were included in the consolidated statements of income and comprehensive income:


	Year Ended December 31,						For the Years Ended December 31,
	2013		2012		2011		2016		2015		2014
Cost of revenues	$	4,823	$	2,809	$	1,365	$	16,619	$	13,695	$	8,648
Selling, general and administrative		8,327		4,017		1,501
Selling, general and administrative expenses — Acquisition related							12,884		18,690		8,829
Selling, general and administrative expenses — All other							19,741		13,448		7,143
Total	$	13,150	$	6,826	$	2,866	$	49,244	$	45,833	$	24,620

During the second quarter of 2013, the Company finalized the fair values of the net assets acquired from Empathy Lab (See Note 2). As a result, the Company issued an additional 1,483 shares of non-vested (“restricted”) common stock to the sellers of Empathy Lab on July 11, 2013 to settle the difference between the initial number of shares issued upon acquisition and the total number of shares due in connection with this transaction. The shares vest 33.33% on each of the first, second and third anniversaries of the closing date. Upon termination of the recipient’s services with the Company with Cause or without Good Reason (in each case, as defined in the escrow agreement), any unvested shares will be forfeited. The fair value of the restricted shares at the time of grant was $42.Equity Plans

2012 Non-Employee Directors Compensation Plan—On January 11, 2012, the Company approved the 2012 Non-Employee Directors Compensation Plan (“2012 Directors Plan”)~~, which will~~ to be used to issue equity grants to its non-employee directors. The Company authorized 600,000 shares of common stock to be reserved for issuance under the plan. As of December 31, 2016, 547,560 shares of common stock remained available for issuance under the 2012 Directors Plan. The 2012 Directors Plan will expire after ~~ten~~10 years and ~~will be~~is administered by the Company’s Board of Directors.

2015 Long-Term Incentive Plan— On ~~January 8, 2013,~~June 11, 2015, the ~~Company issued 5,257~~Company’s stockholders approved the 2015 Long-Term Incentive Plan (“2015 Plan”) to be used to issue equity awards to company personnel. As of December 31, 2016, 6,202,977 shares of ~~non-vested (“restricted”)~~ common stock ~~to its new non-employee director~~remained available for issuance under the ~~2012 Directors~~2015 Plan. ~~The shares will vest and become unforfeitable 25% on each~~All of the ~~first, second, third and fourth anniversaries of~~awards issued pursuant to the ~~grant date. Upon termination of service~~2015 Plan expire 10 years from ~~the Board at any time, a portion of these shares shall vest as of~~ the date of such termination on a pro rata basis determined by the number of days that the participant served on the Board from the grant date through the date of such termination. The fair value of the restricted shares at the time of grant was $101.

On June 13, 2013, the Company issued 8,784 shares of non-vested (“restricted”) common stock to its non-employee directors under the 2012 Non-Employee Directors Compensation Plan. The shares will vest and become unforfeitable on the first anniversary of the grant date. Upon termination of service from the Board at any time, a portion of these shares shall vest as of the date of such termination on a pro rata basis determined by the number of days that the participant served on the Board from the grant date through the date of such termination. The fair value of the restricted shares at the time of grant was $225.grant.

2012 Long-Term Incentive Plan — On January 11, 2012, the Company approved the 2012 Long-Term Incentive Plan (“2012 Plan”)~~, which will~~ to be used to issue equity grants to ~~employees. As of December 31, 2013, 7,042,568 shares of common stock remained available for issuance under~~company personnel. In June 2015, the 2012 ~~Plan. This includes (i) any shares that were available for issuance under~~Plan was discontinued; however, outstanding awards remain subject to the ~~2006 Plan (as defined below) as~~terms of ~~its discontinuance date and that became available for issuance under~~ the 2012 Plan and ~~(ii)~~ any shares that were subject to outstanding awards under the 2006 Plan and have expired or terminated or were cancelled between the discontinuance date of the 2006 Plan and December 31, 2013 and therefore became available for issuance under the 2012 Plan. In addition, up to 2,647,121 shares that are subject to ~~outstanding awards as of December 31, 2013~~an award that was previously granted under the ~~2006~~2012 Plan and that expire or terminate for any reason prior to exercise ~~or that would otherwise have returned to the 2006 Plan’s share reserve~~will become available for issuance under the ~~terms~~2015 Plan. All of the ~~2006 Plan will be available for~~ awards ~~to be granted under the 2012 Plan.~~

~~During the year ended December 31, 2013, the Company~~ issued ~~a total of 1,987,952 shares underlying stock options under~~pursuant to the 2012 Plan ~~with an aggregate grant-date fair value~~expire 10 years from the date of ~~$19,473.~~grant.

2006 Stock Option Plan — Effective May 31, 2006, the Board of Directors of the Company adopted the 2006 Stock Option Plan (the “2006 Plan”)~~. The Company’s~~ to grant stock ~~option plan permitted the granting of~~ options to directors, employees, and certain independent contractors. The Compensation Committee of the Board of Directors generally had the authority to select individuals who were to receive options and to specify the terms and conditions of each option so granted, including the number of shares covered by the option, the exercise price, vesting provisions, and the overall option term. In January 2012, the 2006 Plan was discontinued; however, outstanding awards remain subject to the terms of the 2006 Plan and any shares that are subject to an option award that was previously granted under the 2006 Plan and that ~~will~~ expire or terminate for any reason prior to exercise will become ~~again~~ available for issuance under the ~~2012~~2015 Plan. All of the ~~options~~awards issued pursuant to the 2006 Plan expire ~~ten~~10 years from the date of grant.

~~F-27~~

Stock Options

~~Table of Contents~~

Stock option activity under the Company’s plans is set forth below:

	Number of Options			Weighted Average Exercise Price		Aggregate Intrinsic Value
Options outstanding at January 1, 2011		6,378,584		$	3.79	$	19,708

									Number of Options		Weighted Average Exercise Price		Aggregate Intrinsic Value
Options outstanding at January 1, 2014									5,823,536		$	13.99	$	122,003
Options granted		600,000			14.00		1,200		2,400,500		32.51		36,584
Options exercised		(47,600	)		1.52		(499	)	(1,171,097	)	9.05		(45,321		)
Options forfeited/cancelled		(335,848	)		5.30		(2,250	)	(214,193	)	25.33		(4,802		)
Options outstanding at December 31, 2011		6,595,136		$	4.65	$	48,447
Options outstanding at December 31, 2014									6,838,746		$	20.98	$	183,073
Options granted		1,443,810			16.80		1,877		2,219,725		62.18		36,492
Options exercised		(1,552,742	)		3.53		(22,623	)	(1,405,826	)	14.70		(89,860		)
Options forfeited/cancelled		(189,495	)		11.35		(1,279	)	(201,731	)	34.48		(8,904		)
Options outstanding at December 31, 2012		6,296,709		$	7.51	$	66,682
Options outstanding at December 31, 2015									7,450,914		$	34.07	$	331,938
Options granted		1,987,952			23.60		22,543		313,088		70.27		(1,866		)
Options exercised		(2,156,898	)		4.31		(66,066	)	(895,804	)	20.13		(39,577		)
Options forfeited/cancelled		(304,227	)		11.50		(7,131	)	(227,759	)	47.89		(3,740		)
Options outstanding at December 31, 2013		5,823,536		$	13.99	$	122,003
Options expired									(3,200	)	1.52		(201		)
Options outstanding at December 31, 2016									6,637,239		$	37.20	$	179,936

Options vested and exercisable at December 31, 2013		2,555,245		$	5.89	$	74,230
Options vested and exercisable at December 31, 2016									3,350,682		$	25.96	$	128,499
Options expected to vest		3,010,762		$	20.19	$	44,409		3,127,635		$	48.28	$	50,136

The fair value of each option award is estimated on the date of grant using the Black-Scholes option valuation model. The Company recognizes the fair value of each option as compensation expense ratably using the straight-line method over the service period (generally the vesting period). The Black-Scholes model incorporates the following assumptions:

a. Expected volatility — the Company estimated the volatility of its common stock at the date of grant using historical volatility of peer public ~~companies~~companies. During 2014, the Company began including the historical volatility for the ~~year ended December 31, 2011. In order~~Company in conjunction with peer public companies to ~~compare volatilities for different interval lengths, the Company expresses~~formulate estimated volatility ~~in annual terms. The Company applied the same approach~~ regarding ~~the~~ stock ~~options issued in 2013 and 2012 due to insufficiency of historical volatility data of its stock prices at the time of grant.~~options. The expected volatility was ~~46%~~31.9%, 34.1% and 45.9% in ~~both~~the years ended December 31, ~~2013~~2016, 2015 and ~~2012, and 43% in the year ended December 31, 2011.~~2014, respectively.

b. Expected term— the Company estimates the expected term of options granted using the simplified method of determining expected term as outlined in SEC Staff Accounting Bulletin 107 as ~~used for grants.~~the Company does not have sufficient history in order to develop a more precise estimate. The expected term was 6.24 years in ~~2013, and~~2016, 6.25 years in ~~both 2012~~2015, and ~~2011.~~6.20 years in 2014.

c. Risk-free interest rate — the Company estimates the risk-free interest rate using the U.S. Treasury yield curve for periods equal to the expected term of the options in effect at the time of grant. The risk-free rate was approximately ~~1.41%~~1.5%, ~~1.13%~~1.8% and ~~2.05%~~2.0% in ~~2013, 2012~~2016, 2015 and ~~2011,~~2014, respectively.

d. Dividends — the Company uses an expected dividend yield of zero since it has never declared or paid any dividends on its common stock. The Company intends to retain any earnings to fund future growth and the operation of its business and, therefore, does not anticipate paying any cash dividends in the foreseeable future.

Additionally, the Company estimates forfeitures at the time of grant and revises those estimates in subsequent periods if actual forfeitures differ from those estimates. It uses a combination of historical data and other factors to estimate pre-vesting option forfeitures and recordrecords share-based compensation expense only for those awards that are expected to vest. The Company applies an estimated forfeiture rate at the time of grant and adjusts those estimated forfeitures to reflect actual forfeitures at least annually.

Aggregate grant-date fair value of stock options issued during the year ended December 31, 2016 was $6,874. The options are typically scheduled to vest over four years from the time of grant, subject to the terms of the applicable plan and stock option agreement. In general, in the event of the participant’s termination of service for any reason, unvested options are forfeited as of the date of such termination without any payment to the participant.

As of December 31, ~~2013, there was $28,921 of~~2016, total remaining unrecognized compensation cost related to ~~non-vested share-based~~unvested stock options, net of estimated forfeitures, was approximately $44,162. The expense is expected to be recognized over a weighted-average period of 1.6 years. As of December 31, 2016, the weighted average remaining contractual term was 6.0 years for fully vested and exercisable options and 7.8 years for options expected to vest.

As of December 31, 2016, a total of 2,550 shares underlying options exercised through December 31, 2016, were in transfer with the Company’s transfer agent.

Restricted Stock and Restricted Stock Units

The Company grants awards of restricted stock to non-employee directors under the Company’s 2012 Directors Plan and restricted stock units (“RSUs”) to Company personnel under the Company’s 2015 Plan (and prior to its approval, under the 2012 Plan). In addition, the Company has issued in the past, and may issue in the future, its equity securities to compensate employees of acquired businesses for future services. Equity-based awards granted in connection with acquisitions of businesses are generally issued in the form of service-based awards (dependent on continuing employment only) and performance-based awards, which are granted and vest only if certain specified performance conditions are met. The awards issued in connection with acquisitions of businesses are subject to the terms and conditions contained in the applicable award agreement and acquisition documents with typical vesting period of 3 years, with 33.3% of the awards granted vesting in equal installments on the first, second and third anniversaries of the grant.

Service-Based Awards

The table below summarizes activity related to the Company’s equity-classified and liability-classified service-based awards for the years ended December 31, 2016, 2015 and 2014:



	Equity-Classified Equity-Settled Restricted Stock				Equity-Classified Equity-Settled Restricted Stock Units				Liability-Classified Cash-Settled Restricted Stock Units
	Number of Shares		Weighted Average Grant Date Fair Value Per Share		Number of Shares		Weighted Average Grant Date Fair Value Per Share		Number of Shares		Weighted Average Grant Date Fair Value Per Share
Unvested service-based awards outstanding at January 1, 2014	344,928		$	18.74	—		$	—	—		$	—
Awards granted	452,720		41.63		70,500		32.55		—		—
Awards vested	(217,668	)	17.84		—		—		—		—
Awards forfeited/cancelled	(17,038	)	21.14		—		—		—		—
Unvested service-based awards outstanding at December 31, 2014	562,942		$	37.42	70,500		$	32.55	—		$	—
Awards granted	5,295		70.79		108,319		67.21		—		—
Awards vested	(261,504	)	33.74		(17,625	)	32.55		—		—
Awards forfeited/cancelled	106		36.57		(11,922	)	34.49		—		—
Unvested service-based awards outstanding at December 31, 2015	306,839		$	41.14	149,272		$	57.55	—		$	—
Awards granted	6,510		73.00		408,629		70.39		207,586		70.53
Awards vested	(156,535	)	42.64		(41,015	)	55.60		—		—
Awards forfeited/cancelled	(2,689	)	45.32		(31,698	)	70.44		(3,085	)	70.52
Unvested service-based awards outstanding at December 31, 2016	154,125		$	40.89	485,188		$	67.69	204,501		$	70.53

As of December 31, 2016, the aggregate unrecognized compensation ~~awards.~~expense for outstanding service-based equity-classified restricted stock was $3,444. This expense is expected to be recognized over the next 1.0 years using the weighted average method.

As of December 31, 2016, the aggregate unrecognized compensation expense for all outstanding service-based equity-classified RSUs was $22,584. This cost is expected to be recognized over the next 2.0 years using the weighted average method.

As of December 31, 2016, the aggregate unrecognized compensation expense for all outstanding service-based liability-classified cash-settled RSUs was $8,842, which is expected to be recognized over the next 2.1 years using the weighted average method.

Performance -Based Awards

In 2014, the Company granted performance-based awards in connection with the acquisitions completed during that year. The total number of the awards varies based on attainment of certain performance targets pursuant to the terms of the relevant transaction documents. During the year ended December 31, 2016, two-thirds of the performance-based awards issued in 2014 acquisitions vested, net of any forfeitures.

Summarized activity related to the Company’s performance-based awards for the years ended December 31, 2016, was as follows:



	Equity-Classified Equity-Settled Restricted Stock					Liability-Classified Equity-Settled Restricted Stock				Equity-Classified Equity-Settled Restricted Stock Units
	Number of Shares			Weighted Average Grant Date Fair Value Per Share		Number of Shares		Weighted Average Grant Date Fair Value Per Share		Number of Shares		Weighted Average Grant Date Fair Value Per Share
Unvested performance-based awards outstanding at January 1, 2014	—			$	—	—		$	—	—		$	—
Awards granted	26,441			38.91		360,617		38.13		—		—
Awards vested	—			—		—		—		—		—
Awards forfeited/cancelled	(2,550	)		36.57		—		—		—		—
Changes in the number of awards expected to be delivered	9,154		��	36.57		(22,152	)	18.32		—		—
Unvested performance-based awards outstanding at December 31, 2014	33,045			$	38.44	338,465		$	39.43	—		$	—
Awards granted	—			—		—		—		14,000		70.22
Awards vested	(12,145	)		39.92		(105,604	)	40.44		—		—
Awards forfeited/cancelled	(1,360	)		36.57		—		—		—		—
Changes in the number of awards expected to be delivered	2,550			36.57		(21,655	)	32.27		—		—
Unvested performance-based awards outstanding at December 31, 2015	22,090			$	37.52	211,206		$	39.65	14,000		$	70.22
Awards granted	—			—		—		—		—		—
Awards vested	(9,978	)		40.15		(105,604	)	40.44		(4,666	)	70.22
Awards forfeited/cancelled	(6,539	)		36.97		—		—		(4,667	)	70.22
Unvested performance-based awards outstanding at December 31, 2016	5,573			$	33.47	105,602		$	38.86	4,667		$	70.22

As of December 31, 2016, the aggregate unrecognized compensation expense for all outstanding performance-based equity-classified restricted stock was $144. That cost is expected to be recognized over the next ~~two~~1.0 year using the weighted average method.

As of December 31, 2016, the aggregate unrecognized compensation expense for all outstanding performance-based liability-classified restricted stock was $3,002. That cost is expected to be recognized over the next 1.0 year using the weighted average method.

As of December 31, 2016, the aggregate unrecognized compensation expense for all outstanding performance-based equity-classified RSUs was $471. This expense is expected to be recognized over the next 1.3 years using the weighted average method.

~~F-28~~

~~Table of Contents~~

~~Summary of restricted stock activity is presented below:~~

Number of
Shares

Weighted Average
Grant Date Fair
Value Per Share
Unvested restricted stock outstanding at January 1, 2011 — $ —
Restricted stock granted —
—
Restricted stock vested —
—
Unvested restricted stock outstanding at December 31, 2011 — $ —
Restricted stock granted 757,272 17.15
Restricted stock vested (97,400 ) 12.00
Unvested restricted stock outstanding at December 31, 2012 659,872 $ 17.92
Restricted stock granted 15,524 23.69
Restricted stock vested (330,468 ) 17.33
Unvested restricted stock outstanding at December 31, 2013 344,928 $ 18.74

~~15.EARNINGS PER SHARE~~


15.	EARNINGS PER SHARE

Basic EPS is computed by dividing the net income applicable to common stockholders for the period by the weighted average number of shares of common stock outstanding during the same period. Our Series A-1 Preferred, Series A-2 Preferred, Series A-3 Preferred, restricted stock units and puttable common stock were considered participating securities since these securities had non-forfeitable rights to dividends or dividend equivalents during the contractual period of the award and thus required the two-class method of computing EPS. When calculating diluted EPS, the numeratorDiluted earnings per share is computed by ~~adding back~~dividing the ~~undistributed earnings allocated~~net income available to common shareholders by the ~~participating securities in arriving at the basic EPS and then reallocating such undistributed earnings among the company’s~~weighted-average number of shares of common stock ~~participating securities and~~outstanding during the ~~potential common shares that result from the assumed exercise of all dilutive options. The denominator is~~period increased to include the number of additional shares of common ~~shares~~stock that would have been outstanding ~~had~~if the ~~options~~potentially dilutive securities had been issued. Potentially dilutive securities include outstanding stock options, unvested restricted stock and unvested RSUs. The dilutive effect of potentially dilutive securities is reflected in diluted earnings per share by application of the treasury stock method.

The following table sets forth the computation of basic and diluted earnings per share of common stock as follows:

Year Ended December 31,
2013 2012 2011
Numerator for common earnings per share:

Net income $ 61,994 $ 54,484 $ 44,353
Accretion of preferred stock — — (17,563 )
Net income allocated to participating securities — (3,341 ) (15,025 )
Effect on income available from redemption of preferred stock — — —
Numerator for basic/ (common) earnings per share 61,994 51,143 11,765
Effect on income available from reallocation of options — 261 1,185
Numerator for diluted/ (common) earnings per share $ 61,994 $ 51,404 $ 12,950
Numerator for (puttable common) earnings per share:
Net income allocated to basic (puttable common) — — 26
Effect on income available from reallocation of options — — (12 )
Numerator for diluted (puttable common) earnings per share — — 14
Denominator for basic (common) earnings per share:
Weighted average common shares outstanding 45,754 40,190 17,094
Effect of dilutive securities:
Stock options 2,604 3,631 3,379
Denominator for diluted (common) earnings per share 48,358 43,821 20,473
Denominator for basic and diluted (puttable common) earnings per share:
Weighted average puttable common shares outstanding — — 18
Earnings per share:
Basic (common) $ 1.35 $ 1.27 $ 0.69
Basic (puttable common) $ — $ — $ 1.42
Diluted (common) $ 1.28 $ 1.17 $ 0.63
Diluted (puttable common) $ — $ — $ 0.77



	For the Years Ended December 31,
	2016		2015		2014
Numerator for common earnings per share:
Net income	$	99,266	$	84,456	$	69,641
Numerator for basic and diluted earnings per share	$	99,266	$	84,456	$	69,641

Denominator for basic and diluted earnings per share:
Weighted average common shares outstanding	50,309		48,721		47,189
Effect of dilutive securities:
Stock options, RSUs and performance-based awards	2,906		3,265		2,545
Denominator for diluted earnings per share	53,215		51,986		49,734

Net income per share:
Basic	$	1.97	$	1.73	$	1.48
Diluted	$	1.87	$	1.62	$	1.40

~~F-29~~

~~Table of Contents~~

For the years ended December 31, ~~2013, 2012~~2016, 2015 and ~~2011, options to purchase approximately 1,080, 1,534,~~2014 a total of 2,325, 1,637 and ~~572~~2,260 shares ~~of common stock,~~underlying equity-based awards, respectively, were outstanding but were not included in the ~~calculation~~computation of ~~the~~ diluted earnings per share ~~in corresponding periods~~ because the effect ~~would have been~~was anti-dilutive.

~~16.COMMITMENTS, CONTINGENCIES AND GUARANTEES~~


16.	COMMITMENTS AND CONTINGENCIES

The Company leases office space under operating leases, which expire at various ~~dates through 2019.~~dates. Certain leases contain renewal provisions and generally require the Company to pay utilities, insurance, taxes, and other operating expenses. Rent expense under operating lease agreements for the years ended December 31, ~~2013, 2012~~2016, 2015 and ~~2011~~2014 was ~~$15,664, $11,594,~~$28,220, $20,065, and ~~$8,522~~$18,200 respectively. Future minimum rental payments under operating leases that have initial or remaining lease terms in excess of one year as of December 31, ~~2013~~2016 were as follows:


Year Ending December 31,	Operating Leases		Operating Leases
2014	$	13,924
2015		8,218
2016		4,136
2017		2,504	$	30,791
2018		2,017	24,706
2019			16,044
2020			10,271
2021			7,170
Thereafter		480	11,098
Total minimum lease payments	$	31,279	$	100,080

~~Employee Loan Program~~ — Beginning in third quarter of 2006, the Company started to guarantee bank loans for certain of its key employees. Under the conditions of the guarantees, the Company is required to maintain a security deposit (See Note 6). While the program has been discontinued, total commitment of the Company under these guarantees remains at $233 as of December 31, 2013. The Company estimates a probability of material losses under the program as remote, therefore, no provision for losses was recognized for the years ended December 31, 2013, 2012 and 2011.

~~Construction in progress~~Indemnification Obligations — On December 7, 2011, the Company entered into an agreement with IDEAB Project Eesti AS for the construction of an office building within the High Technologies Park in Minsk, Belarus. The building is expected to be operational in the first half of 2014. As of December 31, 2013, total outstanding commitment of the Company was $1,890.

~~Employee Housing Program~~ — In the third quarter of 2012, the Board of Directors of the Company approved the Employee Housing Program (“the Housing Program”), which assists employees in purchasing housing in Belarus (See Note 5). As of December 31, 2013, the Company’s total outstanding commitment under the Housing Program was $35. The Company estimates a probability of material losses under the program as remote, therefore, no provision for losses was recognized for the year ended December 31, 2013.

~~Indemnifications~~ — In the normal course of business, the Company is a party to a variety of agreements under which it may be obligated to indemnify the other party for certain matters. These obligations typically arise in contracts where the Company customarily agrees to hold the other party harmless against losses arising from a breach of representations or covenants for certain matters such as title to assets and intellectual property rights associated with ~~the sale of products.~~certain arrangements. The duration of these indemnifications varies, and in certain cases, is indefinite.

The Company is unable to reasonably estimate the maximum potential amount of future payments under these or similar agreements due to the unique facts and circumstances of each agreement and the fact that certain indemnifications provide for no limitation to the maximum potential future payments under the indemnification. Management is not aware of any such matters that historically had or would have a material effect on the ~~consolidated~~ financial statements of the Company.

Litigation — From time to time, the Company is involved ~~with~~in litigation, claims or other contingencies. Management is not aware of any such matters that would have a material effect on the consolidated financial statements of the Company.

~~17.FAIR VALUE MEASUREMENTS~~


17.	FAIR VALUE MEASUREMENTS

The Company ~~accounts for~~carries contingent liabilities and certain ~~assets and liabilities~~equity-based awards at fair ~~value.~~ value on a recurring basis on its consolidated balance sheets. Changes in the fair values of these financial liabilities are typically recorded within selling, general and administrative expenses on the Company’s consolidated statements of income and comprehensive income.

The ~~authoritative guidance defines~~following tables show the fair values of the Company’s financial liabilities measured at fair value ~~as the exit price, or the amount that would be received to sell an asset or paid to transfer~~on a liability in an orderly transaction between market participants as of the measurement date. The authoritative guidance also establishes a fair value hierarchy that is intended to increase consistency and comparability in fair value measurements and related disclosures. The fair value hierarchy is based on inputs to valuation techniques that are used to measure fair value that are either observable or unobservable. Observable inputs reflect assumptions market participants would use in pricing an asset or liability based on market data obtained from independent sources while unobservable inputs reflect a reporting entity’s pricing based upon their own market assumptions.

~~F-30~~

~~Table of Contents~~

~~The following table represents the Company’s fair value hierarchy for its financial assets and liabilities~~recurring basis as of December 31, ~~2013,~~2016 and ~~2012.~~2015:



	As of December 31, 2016
	Balance		Level 1		Level 2		Level 3
Performance-based equity awards	$	3,789	$	3,789	$	—	$	—
Cash-settled restricted stock units	2,111		2,111		—		—
Total liabilities measured at fair value on a recurring basis	$	5,900	$	5,900	$	—	$	—

Fair Value Measurements at December 31, 2013 Using
Level 1 Level 2 Level 3
Cash and cash equivalents $ 169,207 $ — $ —
Time deposits and restricted cash — 1,711 —
Employee loans — — 6,390
Total $ 169,207 $ 1,711 $ 6,390

Fair Value Measurements at December 31, 2012 Using
Level 1 Level 2 Level 3
Cash and cash equivalents $ 118,112 $ — $ —
Time deposits and restricted cash — 2,133 —
Employee loans — — 429
Total $ 118,112 $ 2,133 $ 429



	As of December 31, 2015
	Balance		Level 1		Level 2		Level 3
Performance-based equity awards	$	5,364	$	—	$	—	$	5,364
Total liabilities measured at fair value on a recurring basis	$	5,364	$	—	$	—	$	5,364

Performance-based equity awards carried at fair value on a recurring basis represent contractual liabilities related to certain business combination transactions completed in 2014. During the determination period, the Company classified the performance-based equity awards within Level 3. The Company estimated the fair value of these liabilities based on transaction-specific inputs by discounting the expected cash flows to a present value, after taking into account estimated probabilities of reaching specified performance targets, as appropriate. During the year ended December 31, 2016, the fair value of the performance-based awards was measured using prices for which observable market information became available. As a result, the Company reclassified these liabilities from Level 3 to Level 1.

The fair value of the cash-settled restricted stock units is measured using prices for which observable market information is available.

~~During~~A reconciliation of the beginning and ending balances of acquisition-related contractual contingent liabilities using significant unobservable inputs (Level 3) for the years ended December 31, ~~2013~~2016 and ~~2012,~~2015, was as follows:



	Amount
Contractual contingent liabilities at January 1, 2014	$	—
Acquisition date fair value of contractual contingent liabilities — Netsoft	1,825
Acquisition date fair value of contractual contingent liabilities — Jointech	20,000
Acquisition date fair value of contractual contingent liabilities — GGA	11,400
Acquisition date fair value of contractual contingent liabilities — Great Fridays	1,173
Liability-classified stock-based awards	3,088
Changes in fair value of contractual contingent liabilities included in earnings	2,059
Changes in fair value of contractual contingent liabilities recorded against goodwill	1,366
Effect of net foreign currency exchange rate changes	(288		)
Contractual contingent liabilities at December 31, 2014	40,623
Liability-classified stock-based awards	5,148
Changes in fair value of contractual contingent liabilities included in earnings	4,355
Effect of net foreign currency exchange rate changes	246
Settlements of contractual contingent liabilities	(45,008		)
Contractual contingent liabilities at December 31, 2015	5,364
Acquisition date fair value of contractual contingent liabilities — other acquisitions	800
Liability-classified stock-based awards	5,148
Changes in fair value of contractual contingent liabilities included in earnings	1,232
Changes in fair value of contractual contingent liabilities recorded against goodwill	200
Settlements of contractual contingent liabilities	(8,955		)
Reclassification of contractual contingent liabilities out of Level 3	(3,789		)
Contractual contingent liabilities at December 31, 2016	$	—

Estimates of fair value of financial instruments not carried at fair value on a recurring basis on the Company’s consolidated balance sheets are generally subjective in nature, and are determined as of a specific point in time based on the characteristics of the financial instruments and relevant market information. The Company uses the following methods to estimate the fair values of its financial instruments:

for financial instruments that have quoted market prices, those quoted prices are used to estimate fair value;

for financial instruments for which no quoted market prices are available, fair value is estimated using information obtained from independent third parties, or by discounting the expected cash flows using an estimated current market interest rate for the financial instrument.

for financial instruments for which no quoted market prices are available and that have no defined maturity, have a remaining maturity of 360 days or less, or reprice frequently to a market rate, the Company ~~issued~~assumes that the fair value of these instruments approximates their reported value, after taking into consideration any applicable credit risk;

The generally short duration of certain of the Company’s assets and liabilities results in a ~~total~~significant number of ~~$8,963~~assets and ~~$566~~liabilities for which fair value equals or closely approximates the amount recorded on the Company’s consolidated balance sheets. These assets and liabilities are reported on the Company’s consolidated balance sheets:

cash and cash equivalents;

time deposits and restricted cash;

employee loans and notes receivable;

borrowings under the 2014 Credit Facility (Note 13)

In addition, due to the relatively short duration of certain of our loans, the Company considers fair value for these loans to approximate their carrying amounts. The fair value of other types of loans, ~~to its employees, respectively,~~such as employee loans issued under the Housing Program, is estimated using information on the rates of return that market participants in Belarus would require when investing in unsecured U.S. dollar-denominated government bonds with similar maturities (a “risk-free rate”), after taking into consideration any applicable credit and ~~received $3,088~~liquidity risk.

The following tables present the reported amounts and ~~$640 in loan repayments during~~estimated fair values of the ~~same periods, respectively.~~

~~During the years ended December 31, 2013 and 2012, there were no transfers amongst Level 1, Level 2, or Level 3~~ financial assets and ~~liabilities.~~liabilities not carried at fair value on a recurring basis, as they would be categorized within the fair-value hierarchy, as of the dates indicated:



					Fair Value Hierarchy
	Balance		Estimated Fair Value		Level 1		Level 2		Level 3
December 31, 2016
Financial Assets:
Cash and cash equivalents	$	362,025	$	362,025	$	362,025	$	—	$	—
Time deposits and restricted cash	$	3,042	$	3,042	$	—	$	3,042	$	—
Employee loans	$	5,978	$	5,978	$	—	$	—	$	5,978
Financial Liabilities:
Borrowing under 2014 Credit Facility	$	25,019	$	25,019	$	—	$	25,019	$	—

~~18.OPERATING SEGMENTS~~



					Fair Value Hierarchy
	Balance		Estimated Fair Value		Level 1		Level 2		Level 3
December 31, 2015
Financial Assets:
Cash and cash equivalents	$	199,449	$	199,449	$	199,449	$	—	$	—
Time deposits and restricted cash	$	30,419	$	30,419	$	—	$	30,419	$	—
Employee loans	$	6,338	$	6,338	$	—	$	—	$	6,338
Financial Liabilities:
Borrowing under 2014 Credit Facility	$	35,000	$	35,000	$	—	$	35,000	$	—


18.	SEGMENT INFORMATION

The Company determines its business segments and reports segment information in accordance with the management approach, which designates internal reporting used by management to make operating decisions and assess performance as the source of the Company’s reportable segments.

The Company manages its business primarily based on the geographic managerial responsibility for its client base. ~~Because~~As managerial responsibility for a particular client relationship generally correlates with the client’s geographic location, there is a high degree of similarity between client locations and the geographic boundaries of the Company’s reportable segments. In some ~~specific~~ cases, ~~however,~~ managerial responsibility for a particular client is assigned to a management team in another region and is usually based on the strength of the relationship between client executives and particular members of EPAM’s senior management team. In such a case, ~~like this,~~ the client’s activity would be reported through the management team’s reportable segment.

The Company’s reportable segments are North America, Europe, Russia and Other. The revenues in the Other segment represented less than 1% of total segment revenues in 2014 and 2015 due to the ending of certain customer relationships and contractual changes with other clients. As no substantial clients remained in the segment, during the first quarter of 2016, the Company shifted managerial responsibility for the remaining clients to the Russia segment. This change does not represent a change in the Company's existing segments but rather a movement in responsibility for several clients that represent less than 1% of total segment revenue.

The Company’s Chief Operating Decision Maker (“CODM”) evaluates ~~its~~ performance and allocates resources based on ~~segment~~the segment’s revenues and operating profit. Segment operating profit is defined as income from operations before unallocated costs. Generally, operating expenses for each ~~operating~~reportable segment have similar characteristics and are subject to similar factors, pressures and challenges. Expenses included in segment operating profit consist principally of direct selling and delivery costs as well as an allocation of certain shared services expenses. Certain expenses that are not controllable at the segment level are not allocated to specific ~~segments, as management does not believe it is practical to allocate such costs to individual segments because they~~segments. Such “unallocated” expenses are ~~not directly attributable to any specific segment. Further, stock-based compensation expense is~~deducted against the Company’s total income from operations and are not allocated to individual segments in internal management reports used by the CODM. ~~Accordingly, these expenses are separately disclosed as “unallocated” and adjusted only against the Company’s total income from operations.~~

Revenues from external ~~clients~~customers and segment operating profit, before unallocated expenses, for the North America, Europe, Russia and Other reportable segments were as follows:

Year Ended December 31,
2013 2012 2011
Total segment revenues:

North America $ 284,636 $ 197,271 $ 151,707
Europe 204,150 168,913 123,510
Russia 55,764 50,552 46,219
Other 10,493 16,986 12,851
Total segment revenues $ 555,043 $ 433,722 $ 334,287
Segment operating profit:
North America $ 66,814 $ 38,671 $ 33,744
Europe 34,573 32,750 25,098
Russia 7,077 9,049 10,445
Other 844 6,985 2,416
Total segment operating profit $ 109,308 $ 87,455 $ 71,703

~~F-31~~

~~Table of Contents~~

During the years ended December 31, 2013 and 2012, there were no customers that represented at least 10% of total revenues. During the year ended December 31, 2011, revenues from one customer, Thomson Reuters, accounted for 10.7% of total revenues, or $35,903, and were included within our North America segment.



	For the years ended December 31,
	2016		2015			2014
Total segment revenues:
North America	$	642,216	$	471,603		$	374,509
Europe	474,988		400,460			299,279
Russia	43,611		37,992			50,663
Other	—		4,911			5,552
Total segment revenues	$	1,160,815	$	914,966		$	730,003
Segment operating profit:
North America	$	143,021	$	112,312		$	90,616
Europe	67,545		68,717			50,189
Russia	7,555		5,198			7,034
Other	—		(94		)	(3,220		)
Total segment operating profit	$	218,121	$	186,133		$	144,619

Intersegment transactions were excluded from the above on the basis that they are neither included into the measure of a segment’s profit and loss by the ~~chief operating decision maker,~~CODM, nor provided to the ~~chief operating decision maker~~CODM on a regular basis.

During the years ended December 31, 2016, 2015 and 2014, revenues from one customer, UBS AG, were $138,124, $130,605 and $97,872, respectively and accounted for more than 10% of total revenues. Revenue from this customer is reported in the Company’s Europe segment and includes reimbursable expenses.

Trade accounts receivable and unbilled revenues are generally dispersed across our clients in proportion to their revenues. As of December 31, 2016, unbilled trade receivables from two customers, individually exceeded 10% and accounted for 22.2% of our total unbilled trade receivables. There were no customers individually exceeding 10% of our billed trade receivables as of December 31, 2016. As of December 31, 2015, billed and unbilled trade receivables from one customer, UBS AG, individually exceeded 10% and accounted for 12.4% and 19.8% of our total billed and unbilled trade receivables, respectively.

Reconciliation of ~~reportable~~ segment revenues and operating profit to ~~the~~ consolidated income before provision for income taxes is presented below:


	Year Ended December 31,									For the Years Ended December 31,
	2013			2012			2011			2016			2015			2014
Total segment revenues	$	555,043		$	433,722		$	334,287		$	1,160,815		$	914,966		$	730,003
Unallocated revenue		74			77			241
Unallocated (revenue)/loss										(683		)	(838		)	24
Revenues	$	555,117		$	433,799		$	334,528		$	1,160,132		$	914,128		$	730,027

Total segment operating profit	$	109,308		$	87,455		$	71,703
Unallocated Amounts:
Other revenue		74			77			241
Total segment operating profit:										$	218,121		$	186,133		$	144,619
Unallocated amounts:
Other (revenues)/loss										(683		)	(838		)	24
Stock-based compensation expense		(13,150	)		(6,826	)		(2,866	)	(49,244		)	(45,833		)	(24,620		)
Non-corporate taxes		(3,201	)		(2,346	)		(2,722	)	(5,909		)	(4,274		)	(6,882		)
Professional fees		(3,651	)		(2,850	)		(2,802	)	(8,265		)	(7,104		)	(5,312		)
Depreciation and amortization		(2,829	)		(1,100	)		(810	)	(8,290		)	(5,581		)	(7,988		)
Bank charges		(1,194	)		(1,136	)		(793	)	(1,515		)	(1,352		)	(1,049		)
Goodwill impairment loss (Note 3)		—			—			(1,697	)
Stock charge		—			(640	)		—
Provision for bad debts		(36	)		—			—
One-time charges										(706		)	(747		)	(5,983		)
Other corporate expenses		(8,828	)		(6,628	)		(5,246	)	(9,813		)	(14,437		)	(6,626		)
Income from operations		76,493			66,006			55,008		133,696			105,967			86,183
Interest and other income, net		3,077			1,941			1,422		4,848			4,731			4,769
Change in fair value of contingent consideration										—			—			(1,924		)
Foreign exchange loss		(2,800	)		(2,084	)		(3,638	)	(12,078		)	(4,628		)	(2,075		)
Income before provision for income taxes	$	76,770		$	65,863		$	52,792		$	126,466		$	106,070		$	86,953

Geographic Area Information

~~Management~~Long-lived assets include property and equipment, net of accumulated depreciation and amortization, and management has determined that it is not practical to allocate ~~identifiable~~these assets by segment since such assets are used interchangeably ~~amongst~~among the segments. Geographical information about the Company’s long-lived assets based on physical location of the assets was as follows:


	December 31, 2013		December 31, 2012		December 31, 2016		December 31, 2015
Belarus	$	38,697	$	40,095	$	46,011	$	44,879
Russia					7,203		2,084
Ukraine		5,525		5,357	5,610		4,487
Russia		3,414		3,234
Hungary					3,485		2,485
United States		2,217		2,048	2,618		1,969
Hungary		2,644		1,744
Poland					2,213		1,088
China					1,887		514
India					1,650		1,099
Other		818		657	2,939		1,894
Total	$	53,315	$	53,135	$	73,616	$	60,499

~~Long-lived assets included property and equipment, net of accumulated depreciation and amortization.~~

~~F-32~~

~~Table of Contents~~

Information about the Company’s revenues by client location is ~~presented below:~~as follows:


	Year Ended December 31,						For the Years Ended December 31,
	2013		2012		2011		2016		2015		2014
United States	$	247,979	$	197,593	$	163,068	$	605,856	$	427,433	$	318,304
United Kingdom		108,892		98,346		70,989	174,719		164,301		141,366
Russia		53,328		47,507		43,799
Switzerland		51,941		30,120		15,870	122,399		111,353		87,111
Canada		33,759		9,256		2,058	58,742		57,643		49,193
Germany		20,261		16,391		7,909	43,216		36,089		25,740
Kazakhstan		9,886		11,352		8,845
Russia							40,866		36,506		48,945
Sweden							22,945		10,589		7,892
Hong Kong							20,333		23,117		13,445
Netherlands		7,719		3,127		4,031	16,762		9,989		8,838
Sweden		5,742		4,913		5,292
Belgium							8,505		7,916		4,198
Ireland							5,152		5,437		3,667
China							4,445		817		—
Italy							3,970		2,318		1,746
Spain		1,957		1,710		1,893	3,406		1,028		106
Ukraine		681		4,733		891
Other locations		5,346		2,334		3,707	16,295		10,081		11,066
Reimbursable expenses and other revenues		7,626		6,417		6,176	12,521		9,511		8,410
Revenues	$	555,117	$	433,799	$	334,528	$	1,160,132	$	914,128	$	730,027

Service Offering Information

Information about the Company’s revenues by service offering is ~~presented below:~~as follows:



	For the Years Ended December 31,
	2016		2015		2014
Software development	$	841,916	$	644,732	$	504,590
Application testing services	223,010		174,259		140,363
Application maintenance and support	74,475		70,551		58,840
Infrastructure services	5,069		11,311		14,198
Licensing	3,141		3,764		3,626
Reimbursable expenses and other revenues	12,521		9,511		8,410
Revenues	$	1,160,132	$	914,128	$	730,027

Year Ended December 31,
2013 2012 2011
Software development $ 374,426 $ 290,139 $ 219,211
Application testing services 109,222 85,849 67,840
Application maintenance and support 45,971 36,056 29,287
Infrastructure services 14,433 12,424 8,488
Licensing 3,439 2,914 3,526
Reimbursable expenses and other revenues 7,626 6,417 6,176
Revenues $ 555,117 $ 433,799 $ 334,528


19.	QUARTERLY FINANCIAL DATA (UNAUDITED)

~~19.QUARTERLY FINANCIAL DATA (UNAUDITED)~~

Summarized quarterly results for the two years ended December 31, ~~2013~~2016 and ~~2012~~2015 were as follows:

	Three Months Ended
2013	March 31			June 30			September 30			December 31			Full Year

																Three Months Ended
2016																March 31			June 30			September 30			December 31			Full Year
Revenues	$	124,198		$	133,184		$	140,150		$	157,585		$	555,117		$	264,482		$	283,832		$	298,293		$	313,525		$	1,160,132
Operating expenses:
Cost of revenues (exclusive of depreciation and amortization)		77,937			83,547			88,539			97,627			347,650		167,381			180,782			190,797			198,226			737,186
Selling, general and administrative expenses		27,083			28,541			27,893			32,980			116,497		61,494			64,241			67,491			71,432			264,658
Depreciation and amortization expense		3,617			3,854			3,906			3,743			15,120		5,102			6,123			5,925			6,237			23,387
Other operating (income)/ expenses, net		25			(293	)		(418	)		43			(643	)
Other operating expenses, net																174			606			178			247			1,205
Income from operations		15,536			17,535			20,230			23,192			76,493		30,331			32,080			33,902			37,383			133,696
Interest and other income, net		630			769			846			832			3,077		1,211			1,138			1,067			1,432			4,848
Foreign exchange loss		(499	)		(869	)		(720	)		(712	)		(2,800	)	(1,290		)	(2,295		)	(1,728		)	(6,765		)	(12,078		)
Income before provision for income taxes		15,667			17,435			20,356			23,312			76,770		30,252			30,923			33,241			32,050			126,466
Provision for income taxes		2,987			3,317			3,919			4,553			14,776		6,353			6,493			7,067			7,287			27,200
Net income	$	12,680		$	14,118		$	16,437		$	18,759		$	61,994		$	23,899		$	24,430		$	26,174		$	24,763		$	99,266
Comprehensive income	$	10,337		$	13,073		$	19,412		$	18,361		$	61,183		$	28,598		$	22,044		$	26,532		$	19,554		$	96,728
Basic net income per share(1)	$	0.28		$	0.31		$	0.36		$	0.40		$	1.35
Diluted net income per share(1)	$	0.27		$	0.29		$	0.34		$	0.38		$	1.28
Basic net income per share⁽¹⁾																$	0.48		$	0.49		$	0.51		$	0.49		$	1.97
Diluted net income per share⁽¹⁾																$	0.45		$	0.46		$	0.49		$	0.46		$	1.87


(1)	Earnings per share amounts for each quarter may not necessarily total to the yearly earnings per share due to the weighting of shares outstanding on a quarterly and year to date basis.

~~F-33~~

~~Table of Contents~~

	Three Months Ended
2012	March 31		June 30			September 30			December 31			Full Year

															Three Months Ended
2015															March 31			June 30			September 30			December 31		Full Year
Revenues	$	94,383	$	103,800		$	110,078		$	125,538		$	433,799		$	200,045		$	217,781		$	236,049		$	260,253	$	914,128
Operating expenses:
Cost of revenues (exclusive of depreciation and amortization)		60,175		63,803			69,099			77,284			270,361		125,887			134,256			148,479			158,291		566,913
Selling, general and administrative expenses		17,627		20,711			21,153			26,377			85,868		46,938			55,976			55,431			64,414		222,759
Depreciation and amortization expense		2,211		2,423			3,040			3,208			10,882		4,200			3,903			4,393			4,899		17,395
Other operating expenses, net		586		33			50			13			682
Other operating expenses/(income), net															200			40			(30		)	884		1,094
Income from operations		13,784		16,830			16,736			18,656			66,006		22,820			23,606			27,776			31,765		105,967
Interest and other income, net		476		460			486			519			1,941		1,158			1,299			865			1,409		4,731
Foreign exchange gain/ (loss)		80		(1,394	)		(635	)		(135	)		(2,084	)
Foreign exchange (loss)/income															(5,754		)	(465		)	32			1,559		(4,628		)
Income before provision for income taxes		14,340		15,896			16,587			19,040			65,863		18,224			24,440			28,673			34,733		106,070
Provision for income taxes		2,241		2,575			2,522			4,041			11,379		3,510			5,209			5,800			7,095		21,614
Net income	$	12,099	$	13,321		$	14,065		$	14,999		$	54,484		$	14,714		$	19,231		$	22,873		$	27,638	$	84,456
Comprehensive income	$	13,711	$	10,857		$	16,769		$	15,640		$	56,977		$	11,984		$	22,905		$	14,532		$	21,939	$	71,360
Basic net income per share(1)	$	0.30	$	0.31		$	0.33		$	0.35		$	1.27
Diluted net income per share(1)	$	0.27	$	0.29		$	0.30		$	0.32		$	1.17
Basic net income per share⁽¹⁾															$	0.31		$	0.40		$	0.47		$	0.56	$	1.73
Diluted net income per share⁽¹⁾															$	0.29		$	0.37		$	0.44		$	0.52	$	1.62


(1)	Earnings per share amounts for each quarter may not necessarily total to the yearly earnings per share due to the weighting of shares outstanding on a quarterly and year to date basis.

SCHEDULE II

VALUATION AND QUALIFYING ACCOUNTS

(US Dollars inthousands)

The table below summarizes movements in qualifying accounts, which include accounts receivable and notes receivable (from customers) for the years ended December 31, 2016, 2015 and 2014:



	Balance at Beginning of Year		Charged to Expenses		Deductions/ Write offs			Balance at End of Year
Fiscal Year 2014	$	1,800	$	1,325	$	(944	)	$	2,181
Fiscal Year 2015	2,181		1,704		(2,156		)	1,729
Fiscal Year 2016	1,729		3,500		(3,215		)	2,014

~~20.~~

~~SUBSEQUENT EVENTS~~

On March 5, 2014, the Company entered into an agreement to acquire substantially all assets and certain specified liabilities of Netsoft Holdings LLC, a U.S.-based information technology services company with a focus on healthcare industry. In connection with this transaction, the Company also acquired substantially all assets of an Armenian-based company Ozsoft LLC. According to the purchase agreement, the aggregate purchase price, including any additional earn-out payments, will not exceed $6,000.

~~F-34~~

F-43



Delaware	223536104
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)



Title of Each Class		Name of Each Exchange on Which Registered
Common Stock, par value $0.001 per share		New York Stock Exchange



	Page
PART I		2
Item 1.	Business	2
Item 1A.	Risk Factors	1210
Item 1B.	Unresolved Staff Comments	3123
Item 2.	Properties	3123
Item 3.	Legal Proceedings	3223
Item 4.	Mine Safety Disclosures	3223
PART II		3224
Item 5.	Market for ~~Registrant’s~~Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	3224
Item 6.	Selected Financial Data	3526
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3727
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	5545
Item 8.	Financial Statements and Supplementary Data	5646
Item 9.	Changes Inin and Disagreements with Accountants on Accounting and Financial Disclosure	5746
Item 9A.	Controls and Procedures	5746
Item 9B.	Other Information	5747
PART III		5848
Item 10.	Directors, Executive Officers and Corporate Governance	5848
Item 11.	Executive Compensation	5848
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	5848
Item 13.	Certain Relationships and Related Transactions, and Director Independence	5849
Item 14.	Principal Accountant Fees and Services	5849
PART IV		5950
Item 15.	Exhibits, Financial Statement Schedules	5950
SIGNATURES	60
~~EXHIBIT INDEX~~		6153
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS	F-1

	Year Ended December 31,
	2013				2012				2011
	(in thousands, except percent)
Banking and Financial Services	$	156,340	28.2	%	$	111,941	25.8	%	$	76,645	22.9	%
ISVs and Technology		134,970	24.3			106,852	24.6			84,246	25.2
Travel and Consumer		117,248	21.1			95,965	22.1			71,488	21.4
Business Information and Media		75,677	13.6			62,398	14.4			63,988	19.1
Other verticals		63,256	11.4			50,226	11.6			31,985	9.6
Reimbursable expenses and other revenues		7,626	1.4			6,417	1.5			6,176	1.8
Revenues	$	555,117	100.0	%	$	433,799	100.0	%	$	334,528	100.0	%



	% of Revenues for Year Ended December 31,
Client location	2016		2015		2014
North America	57.3	%	53.1	%	50.4	%
Europe	35.5		38.6		39.0
CIS	4.0		4.7		7.6
APAC	2.1		2.6		1.8
Reimbursable expenses and other revenues	1.1		1.0		1.2
Revenues	100.0	%	100.0	%	100.0	%

	% of Segment Revenues for Year Ended December 31,
Segment	2013			2012			2011
North America		51.3	%		45.5	%		45.5	%
Europe		36.8			38.9			36.9
Russia		10.0			11.7			13.8
Other		1.9			3.9			3.8
Segment Revenues		100.0	%		100.0	%		100.0	%

	% of Revenues for Year Ended December 31,
Vertical	2013			2012			2011
Banking and Financial Services		28.2	%		25.8	%		22.9	%
ISVs and Technology		24.3			24.6			25.2
Travel and Consumer		21.1			22.1			21.4
Business Information and Media		13.6			14.4			19.1
Other verticals		11.4			11.6			9.6
Reimbursable expenses and other revenues		1.4			1.5			1.8
Revenues		100.0	%		100.0	%		100.0	%



	Year Ended December 31,
Revenues Greater Than or Equal To	2016	2015	2014
$0.1 million	431	365	306
$0.5 million	266	211	181
$1 million	182	136	116
$5 million	45	33	24
$10 million	19	14	12
$20 million	7	7	6

	% of Revenues for Year Ended December 31,
Service Offering	2013			2012			2011
Software development		67.4	%		66.8	%		65.5	%
Application testing services		19.7			19.8			20.3
Application maintenance and support		8.3			8.3			8.8
Infrastructure services		2.6			2.9			2.5
Licensing		0.6			0.7			1.1
Reimbursable expenses and other revenues		1.4			1.5			1.8
Revenues		100.0	%		100.0	%		100.0	%


~~(1)~~	At December 31, 2013 and 2012, the amounts included $15.1 million and $15.4 million, respectively, related to our building, and $15.7 million and $15.6 million, respectively, of capitalized construction costs related to our corporate facilities in Minsk, Belarus.

~~Name~~	~~Age~~	~~Position~~
~~Arkadiy Dobkin~~	53	~~Director, President and Chief Executive Officer~~
~~Karl Robb~~	51	~~Director, President of EU Operations and Executive Vice President~~
~~Balazs Fejes~~	38	~~Senior Vice President, Global Head of Banking and Financial Services Business Unit~~
~~Anthony J. Conte~~	42	~~Vice President, Chief Financial Officer and Treasurer~~
~~Ginger Mosier~~	49	~~Vice President, General Counsel and Corporate Secretary~~



Location	Square Meters Leased	Square Meters Owned	Total Square Meters
Delivery Centers and Client Management Locations:
Belarus	63,059	21,669	84,728
Ukraine	38,855		38,855
Russia	36,576		36,576
Hungary	26,297		26,297
Poland	16,894		16,894
India	14,802		14,802
China	10,044		10,044
United States	7,331		7,331
Bulgaria	3,244		3,244
Czech Republic	2,851		2,851
Kazakhstan	2,681		2,681
Mexico	2,007		2,007
United Kingdom	1,090		1,090
Canada	978		978
Switzerland	662		662
Armenia	540		540
Sweden	322		322
United Arab Emirates	73		73
Germany	28		28
Philippines	11		11
Total	228,345	21,669	250,014
Executive Office:
Newtown, PA, United States	1,212	—	1,212

2013
Quarter Ended	High		Low
December 31	$	39.00	$	32.55
September 30	$	35.13	$	25.36
June 30	$	27.52	$	20.97
March 31	$	23.68	$	18.98

	Company / Index
Base Period	EPAM Systems, Inc.		S&P 500 Index		Peer Group Index
12/31/2013	$	249.57	$	136.92	$	124.18
9/30/2013	$	246.43	$	124.56	$	103.03
6/30/2013	$	194.14	$	118.99	$	80.39
3/31/2013	$	165.93	$	116.24	$	99.89
12/31/2012	$	129.29	$	105.65	$	85.86
9/30/2012	$	135.29	$	106.72	$	89.48
6/30/2012	$	121.36	$	100.90	$	83.91
3/31/2012	$	146.57	$	104.33	$	102.94
2/8/2012	$	100	$	100	$	100



	Year Ended December 31,
	2016				2015				2014
Financial Services	$	291,845	25.2	%	$	248,526	27.2	%	$	215,425	29.5	%
Travel and Consumer	259,420		22.4		215,303		23.6		157,756		21.6
Software & Hi-Tech	237,437		20.5		192,989		21.1		157,944		21.6
Media & Entertainment	174,017		15.0		120,616		13.2		91,726		12.6
Life Sciences and Healthcare	105,072		9.1		73,327		8.0		42,428		5.8
Emerging Verticals	79,820		6.7		53,856		5.9		56,338		7.7
Reimbursable expenses and other revenues	12,521		1.1		9,511		1.0		8,410		1.2
Revenues	$	1,160,132	100.0	%	$	914,128	100.0	%	$	730,027	100.0	%

2012

2016
Quarter Ended	High		Low		High		Low
December 31	$	20.99	$	17.32	$	69.20	$	54.53
September 30	$	19.64	$	13.94	$	71.79	$	61.47
June 30	$	23.62	$	14.72	$	78.40	$	61.32
March 31	$	21.25	$	13.25	$	78.04	$	54.88




(1)	Graph assumes $100 invested on February 8, 2012, in our common stock, the S&P 500 Index, and the Peer Group Index (capitalization weighted).

Plan Category	Number of securities to be issued upon exercise of outstanding options, warrants and rights			Weighted average exercise price of outstanding options, warrants and rights			Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
Equity compensation plans approved by security holders(1)		5,823,536	(2)	$	13.99	(3)		7,609,671	(4)
Equity compensation plans not approved by security holders		—			—			—
Total		5,823,536		$	13.99			7,609,671


~~(1)~~	This table includes the following stockholder approved plans: the 2012 Plan, the 2006 Plan and the 2012 Directors Plan. Restricted stock grant made to Mr. Robb on January 16, 2012 is not included.
~~(2)~~	Represents the number of underlying shares of common stock associated with outstanding options under our stockholder approved plans and is comprised of 3,176,415 shares underlying options granted under our 2012 Plan and 2,647,121 shares underlying options granted under our 2006 Plan.
~~(3)~~ ~~(4)~~	~~Represents weighted-average exercise price of stock options outstanding under the 2012 Plan and the 2006 Plan.~~ Represents the number of shares available for future issuances under our stockholder approved equity compensation plans and is comprised of 7,042,568 shares available for future issuance under the 2012 Plan (including (i) any shares that were available for issuance under the 2006 Plan as of its discontinuance date and that became available for issuance under the 2012 Plan and (ii) any shares that were subject to outstanding awards under the 2006 Plan and have expired or terminated or were cancelled between the discontinuance date of the 2006 Plan and December 31, 2013 and therefore became available for issuance under the 2012 Plan) and 567,103 shares available for future issuances under the 2012 Directors Plan. Does not include 2,647,121 shares that are subject to outstanding awards as of December 31, 2013 under the 2006 Plan and that will be available for awards to be granted under the 2012 Plan if they expire or terminate for any reason prior to exercise or if they would otherwise return to the 2012 Plan's share reserve.




(1)	In connection with the completion of our initial public offering, we effected an 8-for-1 common stock split as of January 19, 2012. All historical common stock and per share information has been changed to reflect the common stock split.


	As of December 31,										As of December 31,
	2013		2012		2011		2010		2009		2016		2015		2014		2013		2012
	(in thousands)										(in thousands)
Consolidated Balance Sheet Data:
Cash and cash equivalents	$	169,207	$	118,112	$	88,796	$	54,004	$	52,927	$	362,025	$	199,449	$	220,534	$	169,207	$	118,112
Time deposits											403		30,181		—		—		—
Accounts receivable, net		95,431		78,906		59,472		41,488		27,450	199,982		174,617		124,483		95,431		78,906
Unbilled revenues		43,108		33,414		24,475		23,883		13,952	63,325		95,808		55,851		43,108		33,414
Property and equipment, net		53,315		53,135		35,482		25,338		23,053	73,616		60,499		55,134		53,315		53,135
Total assets		432,877		350,814		235,613		170,858		135,407	925,811		778,536		594,026		432,877		350,814
Accrued expenses and other liabilities		20,175		19,814		24,782		15,031		4,928
Deferred revenue		5,076		7,632		6,949		5,151		4,417
Revolving line of credit		—		—		—		—		7,000
Long-term debt											25,048		35,000		—		—		—
Total liabilities		56,776		64,534		54,614		35,900		30,196	144,399		165,313		129,976		56,776		64,534
Preferred stock; Series A-1 convertible redeemable preferred stock and Series A-2 convertible redeemable preferred stock		—		—		85,940		68,377		87,413
Total stockholders’ equity		376,101		286,280		95,059		66,249		16,534	781,412		613,223		464,050		376,101		286,280

	Year Ended December 31, 2011
	As Previously Reported				After Reclassification
	(in thousands, except percent)
ISVs and Technology	$	87,369	26.2	%	$	84,246	25.2	%
Banking and Financial Services		76,419	22.8			76,645	22.9
Travel and Consumer		71,706	21.4			71,488	21.4
Business Information and Media		62,350	18.6			63,988	19.1
Other verticals		30,508	9.2			31,985	9.6
Reimbursable expenses and other revenues		6,176	1.8			6,176	1.8
Revenues	$	334,528	100.0	%	$	334,528	100.0	%


~~(1)~~	~~Includes stock-based compensation expense of $4,823, $2,809 and $1,365 for the years ended December 31, 2013, 2012 and 2011, respectively.~~
~~(2)~~	~~Includes stock-based compensation expense of $8,327, $4,017 and $1,501 for the years ended December 31, 2013, 2012 and 2011, respectively~~

	Total		Less than 1 Year		1-3 Years		3-5 Years		More than 5 Years
	(in thousands)
Operating lease obligations	$	31,279	$	13,924	$	12,354	$	4,521	$	480
Other long-term obligations (1)		1,890		1,890		—		—		—
Employee Housing Program (2)		35		35		—		—		—
Total	$	33,204	$	15,849	$	12,354	$	4,521	$	480


~~(1)~~	On December 7, 2011, we entered into an agreement with IDEAB Project Eesti AS for the construction of a 14,071 square meter office building within the High Technologies Park in Minsk, Belarus. The building is expected to be operational in the first half of 2014. As of December 31, 2013, our total outstanding commitment was $1.9 million.
~~(2)~~	In the third quarter of 2012, our Board of Directors approved the Employee Housing Program, which assists employees in purchasing housing in Belarus. As part of the program, we will extend financing to employees up to an aggregate amount of $10.0 million.


(1)	Included $16,619, $13,695 and $8,648 of stock-based compensation expense for the years ended December 31, 2016, 2015 and 2014, respectively;


(2)	Included $32,625, $32,138 and $15,972 of stock-based compensation expense for the years ended December 31, 2016, 2015 and 2014, respectively.



	Year Ended December 31,
	2016			2015			2014
	(in thousands)
Consolidated Statements of Cash Flow Data:
Net cash provided by operating activities	$	164,817		$	76,393		$	104,874
Net cash used in investing activities	(9,322		)	(125,494		)	(52,929		)
Net cash provided by financing activities	10,467			33,764			10,347
Effect of exchange rate changes on cash and cash equivalents	(3,386		)	(5,748		)	(10,965		)
Net increase/(decrease) in cash and cash equivalents	$	162,576		$	(21,085	)	$	51,327
Cash and cash equivalents, beginning of period	199,449			220,534			169,207
Cash and cash equivalents, end of period	$	362,025		$	199,449		$	220,534




(1)	We estimate our future obligations for interest on our floating rate 2014 Credit Facility by assuming the weighted average interest rates in effect on each floating rate debt obligation at December 31, 2016 remain constant into the future. This is an estimate, as actual rates will vary over time. In addition, for the Revolving Credit Facility, we assume that the balance outstanding as of December 31, 2016 remains the same for the remaining term of the agreement. The actual balance outstanding under our Revolving Credit Facility may fluctuate significantly in future periods, depending on the availability of cash flow from operations and future investing and financing considerations.
(2)	We estimate our future obligations for long-term incentive plan payouts by assuming the price per share of our common stock in effect at December 31, 2016 remains constant into the future. This is an estimate, as actual prices will vary over time.




(1)	This table includes the following stockholder approved plans: the 2015 Plan, 2012 Plan, the 2006 Plan and the 2012 Directors Plan.
(2)	Represents the number of underlying shares of common stock associated with outstanding options under our stockholder approved plans and is comprised of 414,235 shares underlying options granted under our 2015 Plan; 5,539,460 shares underlying options granted under our 2012 Plan; and 683,544 shares underlying options granted under our 2006 Plan.
(3)	Represents the weighted-average exercise price of stock options outstanding under the 2015 Plan, the 2012 Plan and the 2006 Plan.
(4)	Represents the number of shares available for future issuances under our stockholder approved equity compensation plans and is comprised of 6,202,977 shares available for future issuance under the 2015 Plan and 547,560 shares available for future issuances under the 2012 Directors Plan.
(5)	Not applicable.


~~EPAM SYSTEMS, INC.~~

~~By:~~	~~/s/ Arkadiy Dobkin~~
	~~Name:~~	~~Arkadiy Dobkin~~
	~~Title:~~	~~Chairman, Chief Executive Officer and President~~

~~Signature~~	~~Title~~	~~Date~~

~~/s/ Arkadiy Dobkin~~	~~Chairman, Chief Executive Officer and President~~Exhibit ~~(principal executive officer)~~Number	~~March 10, 2014~~
~~Arkadiy Dobkin~~

~~/s/ Anthony J. Conte~~	~~Vice President, Chief Financial Officer and Treasurer~~ ~~(principal financial officer and principal accounting officer)~~	~~March 10, 2014~~
~~Anthony J. Conte~~

~~/s/ Karl Robb~~	~~Director~~	~~March 10, 2014~~
~~Karl Robb~~


~~/s/ Andrew J. Guff~~	~~Director~~	~~March 10, 2014~~
~~Andrew J. Guff~~


~~/s/ Donald P. Spencer~~	~~Director~~	~~March 10, 2014~~
~~Donald P. Spencer~~


~~/s/ Richard Michael Mayoras~~	~~Director~~	~~March 10, 2014~~
~~Richard Michael Mayoras~~


~~/s/ Robert E. Segert~~	~~Director~~	~~March 10, 2014~~
~~Robert E. Segert~~


~~/s/ Ronald Vargo~~	~~Director~~	~~March 10, 2014~~
~~Ronald Vargo~~

	~~Exhibit Number~~		Description

3.1		Certificate of incorporation (incorporated herein by reference to Exhibit 3.1 to the Company’s Form 10-K for the fiscal year ended December 31, 2011, SEC File No. 001-35418, filed March 30, 2012 (the “2011 Form 10-K”))
	3.2		Bylaws (incorporated herein by reference to Exhibit 3.2 to the 2011 Form 10-K)
	4.1		Form of Common Stock Certificate (incorporated herein by reference to Exhibit 4.1 to Amendment No. 6 to Form S-1, SEC File No. 333-174827, filed January 23, 2012 (“Amendment No. 6”))
	4.2		Amended and Restated Registration Rights Agreement dated February 19, 2008 (incorporated herein by reference to Exhibit 4.2 to Form S-1, SEC File No. 333-174827, filed June 10, 2011 (the “Registration Statement”))
	4.3		Registration Rights Agreement dated April 26, 2010 (incorporated herein by reference to Exhibit 4.3 to the Registration Statement)
	~~10.1~~		~~Revolving line of credit between EPAM Systems, Inc. and PNC Bank, National Association dated November 22, 2006 (incorporated herein by reference to Exhibit 10.1 to the Registration Statement)~~
	~~10.2~~		~~Security Agreement between EPAM Systems, Inc. and PNC Bank, National Association dated November 22, 2006 (incorporated herein by reference to Exhibit 10.2 to the Registration Statement)~~
	~~10.3~~		~~Borrowing Base Rider between EPAM Systems, Inc. and PNC Bank, National Association dated November 22, 2006 (incorporated herein by reference to Exhibit 10.3 to the Registration Statement)~~
	~~10.4~~		First Amendment to loan documents between EPAM Systems, Inc. and PNC Bank, National Association dated September 30, 2010 (incorporated herein by reference to Exhibit 10.4 to the Registration Statement)
	~~10.5~~		~~Amended and Restated Committed Line of Credit Note dated September 30, 2010 (incorporated herein by reference to Exhibit 10.5 to the Registration Statement)~~
	~~10.6†~~10.1†		EPAM Systems, Inc. Amended and Restated 2006 Stock Option Plan (incorporated herein by reference to Exhibit 10.6 to Amendment No. 6)
	~~10.7†~~10.2†		Form of EPAM Systems, Inc. 2006 Stock Option Plan Award Agreement (under the EPAM Systems, Inc. Amended and Restated 2006 Stock Option Plan) (incorporated herein by reference to Exhibit 10.7 to Amendment No. 6)
	~~10.8~~		Second Amendment to loan documents between EPAM Systems, Inc. and PNC Bank, National Association dated July 25, 2011 (incorporated by reference to Exhibit 10.11 to Amendment No. 3 to Form S-1, SEC File No. 333-17482, filed September 26, 2011(“Amendment No. 3”))
	~~10.9~~		~~Second Amended and Restated Committed Line of Credit Note dated July 25, 2011 (incorporated by reference to Exhibit 10.12 to Amendment No. 3)~~
	~~10.10†~~10.3†		EPAM Systems, Inc. 2012 ~~Long Term~~Long-Term Incentive Plan (incorporated herein by reference to Exhibit 10.12 to Amendment No. 6)
	~~10.11†~~10.4†		Form of Senior Management Non-Qualified Stock Option Award Agreement (under the EPAM Systems, Inc. 2012 ~~Long Term~~Long-Term Incentive Plan) (incorporated herein by reference to Exhibit 10.13 to Amendment No. 6)
	~~10.12†~~10.5†		Restricted Stock Award Agreement by and between Karl Robb and EPAM Systems, Inc. dated January 16, 2012 (incorporated herein by reference to Exhibit 10.14 to Amendment No. 6)
10.6†	~~10.13†~~	Form of Chief Executive Officer Restricted Stock Unit Award Agreement (under the EPAM Systems, Inc. 2012 Long-Term Incentive Plan) (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2014, SEC File No. 001-35418, filed May 7, 2014 (the “Q1 2014 Form 10-Q”)
10.7†		Form of Senior Management Restricted Stock Unit Award Agreement (under the EPAM Systems, Inc. 2012 Long-Term Incentive Plan) (incorporated by reference to Exhibit 10.2 to the Q1 2014 Form 10-Q)
10.8†		Form of Chief Executive Officer Non-Qualified Stock Option Award Agreement (under the EPAM Systems, Inc. 2012 Long-Term Incentive Plan) (incorporated by reference to Exhibit 10.3 to the Q1 2014 Form 10-Q)
10.9†		Form of Chief Executive Officer Restricted Stock Unit Award Agreement (under the EPAM Systems, Inc. 2012 Long-Term Incentive Plan) (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2015, SEC File No. 001-35418, filed May 7, 2015 (the “Q1 2015 Form 10-Q”)
10.10†		Form of Senior Management Restricted Stock Unit Award Agreement (under the EPAM Systems, Inc. 2012 Long-Term Incentive Plan) (incorporated by reference to Exhibit 10.2 to the Q1 2015 Form 10-Q)
10.11†		EPAM Systems, Inc. ~~2012~~2015 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, SEC File No. 001-35418, filed June 15, 2015)
10.12†*		Form of Chief Executive Officer Non-Qualified Stock Option Award Agreement (under the EPAM Systems, Inc. 2015 Long-Term Incentive Plan)
10.13†*		Form of Chief Executive Officer Restricted Stock Unit Award Agreement (under the EPAM Systems, Inc. 2015 Long-Term Incentive Plan)
10.14†*		Form of Senior Management Non-Qualified Stock Option Award Agreement (under the EPAM Systems, Inc. 2015 Long-Term Incentive Plan)
10.15†*		Form of Senior Management Restricted Stock Unit Award Agreement (under the EPAM Systems, Inc. 2015 Long-Term Incentive Plan)
10.16†		Amended and Restated EPAM Systems, Inc. Non-Employee Directors Compensation Plan (incorporated herein by reference to Exhibit ~~10.15~~10.3 to ~~Amendment No. 6 to~~the Q1 2015 Form ~~S-1 SEC File No. 333-174827, filed January 23, 2012)~~10-Q)
	~~10.14†~~10.17†		Form of Non-Employee Director Restricted Stock Award Agreement (under the EPAM Systems, Inc. 2012 Non-Employee Directors Compensation Plan) (incorporated herein by reference to Exhibit 10.16 to Amendment No. 6)
	~~10.15†~~10.18†		~~EPAM Systems, Inc.~~Amended and Restated Non-Employee Director Compensation Policy (incorporated herein by reference to Exhibit ~~10.17~~10.4 to ~~Amendment No. 6)~~the Q1 2015 Form 10-Q)

	As of December 31, 2013			As of December 31, 2012
Assets
Current assets
Cash and cash equivalents	$	169,207		$	118,112
Accounts receivable, net of allowance of $1,800 and $2,203 respectively		95,431			78,906
Unbilled revenues		43,108			33,414
Prepaid and other current assets		14,355			11,835
Employee loans, net of allowance for loan losses of $0 and $0, respectively, current		1,989			429
Time deposits		1,188			1,006
Restricted cash, current		298			660
Deferred tax assets, current		5,392			6,593
Total current assets		330,968			250,955
Property and equipment, net		53,315			53,135
Restricted cash, long-term		225			467
Employee loans, net of allowance for loan losses of $0 and $0, respectively, long-term		4,401			—
Intangible assets, net		13,734			16,834
Goodwill		22,268			22,698
Deferred tax assets, long-term		4,557			6,093
Other long-term assets		3,409			632
Total assets	$	432,877		$	350,814

Liabilities
Current liabilities
Accounts payable	$	2,835		$	6,095
Accrued expenses and other liabilities		20,175			19,814
Deferred revenues, current		4,543			6,369
Due to employees		12,665			12,026
Taxes payable		14,171			14,557
Deferred tax liabilities, current		275			491
Total current liabilities		54,664			59,352
Deferred revenues, long-term		533			1,263
Taxes payable, long-term		1,228			1,228
Deferred tax liabilities, long-term		351			2,691
Total liabilities		56,776			64,534
Commitments and contingencies (See Note 16)

Stockholders’ equity
Common stock, $0.001 par value; 160,000,000 authorized; 47,569,463 and 45,398,523 shares issued, 46,614,916 and 44,442,494 shares outstanding at December 31, 2013 and December 31, 2012, respectively		46			44
Additional paid-in capital		195,585			166,962
Retained earnings		190,986			128,992
Treasury stock		(8,684	)		(8,697	)
Accumulated other comprehensive loss		(1,832	)		(1,021	)
Total stockholders’ equity		376,101			286,280
Total liabilities and stockholders’ equity	$	432,877		$	350,814

	For the Years Ended December 31, 2013, 2012 and 2011 (US Dollars in thousands, except share data)
	Series A-1 and A-2, Convertible Redeemable Preferred Stock						Puttable Common Stock						Common Stock				Series A-3 Convertible Preferred Stock					Additional Paid-in Capital			Retained Earnings			Treasury Stock			Accumulated Other Comprehensive Income			Total Stockholders’ Equity
	Shares			Amount			Shares			Amount			Shares		Amount		Shares			Amount
Balance, December 31, 2010		2,439,739		$	68,377			56,896		$	332			17,054,408	$	17		290,277		$	—	$	36,750		$	47,718		$	(15,972	)	$	(2,264	)	$	66,249
Accretion of A-2 preferred stock to redemption value		—			17,563			—			—			—		—		—					—			(17,563	)		—			—			(17,563	)
Stock-based compensation expense		—			—			—			—			—		—		—			—		2,866			—			—			—			2,866
Proceeds from stock options exercises		—			—			—			—			47,600		—		—			—		72			—			—			—			72
Put option expiry		—			—			(56,896	)		(332	)		56,896		—		—			—		332			—			—			—			332
Currency translation adjustment		—			—			—			—			—		—		—			—		—			—			—			(1,250	)		(1,250	)
Net income		—			—			—			—			—		—		—			—		—			44,353			—			—			44,353
Balance, December 31, 2011		2,439,739			85,940			—			—			17,158,904		17		290,277			—		40,020			74,508			(15,972	)		(3,514	)		95,059
Conversion to common stock		(2,439,739	)		(85,940	)		—			—			21,840,128		22		(290,277	)		—		85,918			—			—			—			85,940
Initial public offering of common stock		—			—			—			—			2,900,000		3		—			—		32,361			—			—			—			32,364
Offering issuance costs		—			—			—			—			—		—		—			—		(3,395	)		—			—			—			(3,395	)
Issuance of restricted stock		—			—			—			—			213,656		—		—			—		—			—			—			—			—
Stock issued in connection with acquisition of Instant Information		—			—			—			—			53,336		—		—			—		640			—			—			—			640
Stock issued in connection with acquisition of Thoughtcorp, Inc. (Note 2)		—			—			—			—			434,546		—		—			—		(346	)		—			3,953			—			3,607
Stock issued in connection with acquisition of Empathy Lab, LLC (Note 2)		—			—			—			—			326,344		—		—			—		(2,969	)		—			2,969			—			—
Stock-based compensation expense		—			—			—			—			—		—		—			—		6,826			—			—			—			6,826
Proceeds from stock options exercises		—			—			—			—			1,515,580		2		—			—		4,963			—			—			—			4,965
Treasury stock retirement		—			—			—			—			—		—		—			—		(353	)		—			353			—			—
Excess tax benefits		—			—			—			—			—		—		—			—		3,297			—			—			—			3,297
Currency translation adjustment		—			—			—			—			—		—		—			—		—			—			—			2,493			2,493
Net income		—			—			—			—			—		—		—			—		—			54,484			—			—			54,484
Balance, December 31, 2012		—		$	—			—		$	—			44,442,494	$	44		—		$	—	$	166,962		$	128,992		$	(8,697	)	$	(1,021	)	$	286,280

	Balance at Beginning of Period		Charged to Costs and Expenses		Deductions/ Other			Balance at End of Year
Allowance for Doubtful Accounts (Billed and Unbilled):
Fiscal Year 2011	$	1,671	$	1,234	$	(655	)	$	2,250
Fiscal Year 2012		2,250		1,244		(1,291	)		2,203
Fiscal Year 2013		2,203		619		(1,022	)		1,800

Large accelerated filer

Accelerated filer

Non-accelerated filer

¨ ~~(Do~~(Do not check if a smaller reporting company)

Smaller reporting company