Classmates.com 2008 Annual Report Download - page 47

Table of Contents
Critical Accounting Policies, Estimates and Assumptions
General
Our discussion and analysis of our financial condition and results of operations is based upon our audited consolidated financial statements,
which have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") and with the
instructions for Form 10-K and Article 10 of Regulation S-X issued by the SEC. The preparation of financial statements in accordance with
GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of
contingent liabilities and the reported amounts of revenues and expenses. Actual results could differ from those estimates and assumptions. The
results of operations for interim or transition periods are not necessarily indicative of the operating results for a full year. We apply the following
critical accounting policies in the preparation of our consolidated financial statements:
Revenue Recognition
FTD Segment Revenue Recognition—
Products revenues and 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 and delivery costs 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—
Revenues are comprised of services revenues, which are
derived primarily from fees charged to pay accounts, and advertising revenues. We apply 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 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. We recognize 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. We also apply the provisions of Emerging Issues Task Force ("EITF") Issue No. 00-21, Revenue
Arrangements with Multiple Deliverables
.
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. Our 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. We offer alternative payment methods to credit cards for certain pay service plans. These alternative payment
methods currently include ACH, payment
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