Classmates.com 2008 Annual Report Download - page 111

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)
expire unredeemed points in accounts that are inactive for a period of twelve consecutive months. For purposes of the member redemption
liability, "inactive" means a lack of all of the following: Web site visit; email response; survey completion; profile update; or any point-earning
or point-redeeming transaction. The canceling or disabling of inactive accounts would have no impact on the Company's consolidated financial
statements, as the Company fully considers inactive accounts when establishing the member redemption liability, as discussed above.
FTD Segment Revenue Recognition —Products revenues and the related cost of revenues are generally recognized when products are
delivered to the customers. Shipping and service fees charged to customers are recognized at the time the product revenue is recognized and are
included in products revenue. Shipping fees are included in cost of revenues. FTD's consumer businesses generally recognize revenue on a gross
basis as FTD bears the risks and rewards associated with the revenue generating activities by: (1) acting as a principal in the transaction;
(2) establishing prices; (3) being responsible for fulfillment of the order; (4) taking the risk of loss for collection, delivery and returns; and
(5) marketing the products and services.
FTD also sells computer systems to its florist members and recognizes revenue in accordance with Statement of Position ("SOP") 97-2,
Software Revenue Recognition , as amended by SOP 98-9, Modification of SOP 97-2, "Software Revenue Recognition, with Respect to Certain
Transactions". FTD recognizes revenue on hardware which is sold without software at the time of delivery. For hardware sales that include
software, revenue is recognized when delivery, installation and customer acceptance have all occurred.
Services revenues based on enabling the delivery of orders by FTD florist members are recognized in the period in which the orders are
delivered. Monthly, recurring fees and other florist network service-based fees are recognized in the period in which the service has been
provided.
Classmates Media Segment and Communications Segment Revenue Recognition —
The Company's Classmates Media and Communications
revenues are comprised of services revenues, which are derived primarily from fees charged to pay accounts, and advertising revenues. The
Company applies the provisions of SEC Staff Accounting Bulletin ("SAB") No. 104, Revenue Recognition in Financial Statements, which
provides guidance on the recognition, presentation and disclosure of revenue in financial statements filed with the Securities and Exchange
Commission ("SEC"). SAB No. 104 outlines the basic criteria that must be met to recognize revenue and provides guidance for disclosure
related to revenue recognition policies. The Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has
occurred or services have been rendered, the fee is fixed or determinable, no significant Company obligations remain, and collectibility is
reasonably assured.
Services revenues for our social networking services and Communications services are recognized in the period in which fees are fixed or
determinable and the related services are provided to the customer. The Company's pay accounts generally pay in advance for their service by
credit card, and revenue is then recognized ratably over the service period. Advance payments from pay accounts are recorded on the
consolidated balance sheets as deferred revenue. The Company offers alternative payment methods to credit cards for certain pay service plans.
These alternative payment methods currently include automated clearinghouse ("ACH"), payment by personal check or money order, or through
a local telephone company. In circumstances where payment is not received in advance, revenue is only recognized if collectibility is reasonably
assured.
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