Classmates.com 2006 Annual Report Download - page 65
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A company’s internal control over financial reporting is a process designed 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 (i) pertain to the maintenance of records that, in
reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) 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 (iii) 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 its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of
any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or
that the degree of compliance with the policies or procedures may deteriorate.
As described in “Management’s Report on Internal Control Over Financial Reporting”, management has excluded from its assessment of
internal control over financial reporting as of December 31, 2006, certain elements of the internal control over financial reporting of
MyPoints.com, Inc. (“MyPoints”), a wholly-owned subsidiary, because MyPoints was acquired by the Company in a purchase business
combination during 2006. Subsequent to the acquisition, certain elements of the acquired business’ internal control over financial reporting and
related processes were integrated into the Company’s existing systems and internal control over financial reporting. Those controls that were not
integrated have been excluded from management’s assessment of the effectiveness of internal control over financial reporting as of
December 31, 2006. We have also excluded these elements of the internal control over financial reporting of the acquired business from our
audit of the Company’
s internal control over financial reporting. The excluded elements represent controls over accounts of approximately 4% of
the Company’s consolidated assets at December 31, 2006 and 8% of consolidated revenue for the year then ended .
F- 3
/s/ PRICEWATERHOUSECOOPERS LLP
Los Angeles, California
February 28, 2007