Classmates.com 2009 Annual Report Download - page 118

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)
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, unredeemed points expire after twelve consecutive months of inactivity. 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 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 by the floral network members and third-party suppliers; (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 floral network members and recognizes revenue in accordance with ASC 985, Software. 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 floral network members are recognized in the period in which the orders are
delivered. Monthly, recurring fees and other floral 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 online social networking revenues 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 ASC 605, Revenue Recognition, which provides guidance on the recognition, presentation and
disclosure of revenue in financial statements filed with the Securities and Exchange Commission ("SEC"). ASC 605 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 the Company's online social networking services and for 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 services 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 use of automated clearing-
house ("ACH"), payment by personal check or
money order, or payment through a local telephone company. In circumstances where payment is not received in advance, revenue is only
recognized if collectibility is also reasonably assured.
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