Classmates.com 2008 Annual Report Download - page 107

Table of Contents
UNITED ONLINE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
1. DESCRIPTION OF BUSINESS, BASIS OF PRESENTATION, ACCOUNTING POLICIES, AND RECENT ACCOUNTING
PRONOUNCEMENTS (Continued)
approximately 15% of the Company's consolidated accounts receivable balance. For the years ended December 31, 2008, 2007 and 2006, the
Company did not have any individual customers that comprised more than 10% of total revenues.
At December 31, 2008 and 2007, the Company's cash and cash equivalents were maintained primarily with major financial institutions and
brokerage firms in the U.S. Deposits with these institutions and firms generally exceed the amount of insurance provided on such deposits.
Property and Equipment —Property and equipment are stated at historical cost less accumulated depreciation and amortization.
Depreciation is computed using the straight-line method over the estimated useful lives of the assets, which is generally two to three years for
computer software and equipment, three to seven years for furniture and fixtures, twenty-five to forty years for buildings, and five to forty years
for building improvements. Leasehold improvements, which are included in furniture and fixtures, are amortized using the straight-line method
over the shorter of the lease term or up to ten years. Upon the sale or retirement of property or equipment, the cost and related accumulated
depreciation or amortization is removed from the Company's consolidated financial statements with the resulting gain or loss reflected in the
Company's results of operations. Repairs and maintenance costs are expensed as incurred.
Derivative Instruments —The Company accounts for derivative instruments in accordance with SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities
. The Company uses an interest rate cap to manage risks associated with interest rate fluctuations on certain
of its credit facilities which, if effective, is accounted for as a cash flow hedge, as defined by SFAS No. 133. Any ineffective portion of the gain
or loss on the interest rate cap is reported in earnings.
Derivatives are recognized on the balance sheet at fair value. Changes in the fair value of derivatives that qualify as cash flow hedges are
recorded in accumulated other comprehensive income (loss) and are subsequently reclassified into earnings when the underlying transactions
occur. Cash flows from hedging activities are classified in the consolidated statements of cash flows under the same category as the cash flows
from the hedged item.
The Company formally assesses, at inception and on an ongoing basis, whether the derivatives that are used in hedging transactions are
highly effective in offsetting changes in cash flows of hedged items. If it is determined that a derivative is not highly effective as a hedge, or that
it ceased to be a highly effective hedge or if a forecasted hedge is no longer probable to occur, gains or losses on the derivative are reported in
earnings.
Fair Value of Financial Instruments —In accordance with SFAS No. 157, Fair Value Measurements , the Company maximizes the use of
observable inputs and minimizes the use of unobservable inputs when developing fair value measurements. When available, the Company uses
quoted market prices to measure fair value. If market prices are not available, fair value measurement is based upon models that use primarily
market-based or independently-sourced market parameters. If market observable inputs for model-based valuation techniques are not available,
the Company will be required to make judgments about assumptions market participants would use in estimating the fair value of the financial
instrument. Fair values of cash and cash equivalents, short-term accounts receivable, accounts payable, accrued liabilities, and short-term
borrowings approximate their carrying amounts because of their short-term nature. Marketable securities and derivative instruments are
recognized in the balance
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