Classmates.com 2008 Annual Report Download - page 110

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)
assets' carrying values and the undiscounted cash flows, the impairment loss is measured as the amount by which the carrying amount of the
assets exceeds the fair market value of the assets. Definite-lived intangible assets are amortized on either a straight-line basis or an accelerated
basis over their estimated useful lives, ranging from two to ten years.
The process of evaluating the potential impairment of long-
lived intangible assets is subjective and requires significant judgment on matters
such as, but not limited to, the asset group to be tested for recoverability. The Company is also required to make estimates that may significantly
impact the outcome of the analyses. Such estimates include, but are not limited to, future operating performance and cash flows, cost of capital,
terminal values, and remaining economic lives of assets.
Member Redemption Liability —Member redemption liability for loyalty marketing points represents the estimated costs associated with
the obligation of MyPoints to redeem outstanding points accumulated by its loyalty marketing members as well as those points purchased by its
advertisers for use in such advertisers' promotion campaigns as they have been earned by MyPoints' members, less an allowance for points
expected to expire prior to redemption. The estimated cost of points is primarily presented in cost of revenues, except for the portion related to
member acquisition activities, internal marketing surveys and other non-
revenue generating activities which are presented in sales and marketing
expenses. The member redemption liability is recognized when members earn points and is reduced when members redeem accumulated points
upon reaching required redemption thresholds or when points are expired prior to redemption.
MyPoints members may redeem points for third-party gift cards and other rewards. Members earn points when they respond to direct
marketing offers delivered by MyPoints, purchase goods or services from advertisers, engage in certain promotional campaigns of advertisers, or
engage in other specified activities.
The member redemption liability is estimated based upon the weighted-average cost and number of points that may be redeemed in the
future. On a monthly basis, the weighted-average cost of points is calculated by taking the total cost of items fulfilled divided by total points
redeemed. The discounts and points needed to redeem awards vary by merchant and award denomination. MyPoints purchases gift cards and
other awards from merchants at a discount and sets redemption levels for its members. MyPoints has the ability to adjust the number of points
required to redeem awards to reflect changes in the cost of awards.
On a monthly basis, MyPoints accounts for and reduces the gross points issued by an estimate of points that will never be redeemed by its
members. This reduction is calculated based on an analysis of historical point-earning trends, redemption activities and individual member
account activity, in accordance with Emerging Issues Task Force ("EITF") Issue No. 00-22, Accounting for "Points" and Certain Time-Based or
Volume-Based Sales Incentive Offers, and Offers for Free Products and Services to be Delivered in the Future . MyPoints' historical analysis
takes into consideration the total points in members' accounts that have been inactive for six months or longer, less an estimated reactivation rate,
plus an estimate of future inactive points. Changes in, among other factors, the net number of points issued, redemption activities and members'
activity levels could materially impact the member redemption liability.
Points in active accounts do not expire. However, under the terms and conditions of membership in MyPoints' loyalty marketing program,
MyPoints reserves the right to cancel or disable accounts and
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