Enom 2014 Annual Report Download - page 43

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year in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce
deferred tax assets to the amount expected to be realized.
As of December 31, 2014, we had approximately $110.7 million of federal and $8.3 million of state operating loss carry-
forwards available to offset future taxable income which expire in varying amounts beginning in 2020 for federal and 2014 for state
purposes if unused. Federal and state laws impose substantial restrictions on the utilization of net operating loss and tax credit carry-
forwards in the event of an “ownership change,” as defined in Section 382 of the Internal Revenue Code of 1986, as amended, or the
Internal Revenue Code. Currently, we do not expect the utilization of our net operating loss and tax credit carry-forwards in the near
term to be materially affected as no significant limitations are expected to be placed on these carry-forwards as a result of our previous
ownership changes. If an ownership change is deemed to have occurred as a result of our initial public offering, potential near term
utilization of these assets could be reduced.
Critical Accounting Policies and Estimates
Management’s discussion and analysis of our financial condition and results of operations are based upon our consolidated
financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States. The
preparation of the consolidated financial statements requires management to make estimates and assumptions that affect the reported
amounts of assets, liabilities, revenue, expenses and related disclosures. We evaluate our estimates and assumptions on an ongoing
basis. Our estimates are based on historical experience and various other assumptions that we believe to be reasonable under the
circumstances. Our actual results could differ from these estimates.
We believe that the estimates and assumptions associated with our revenue recognition, accounts receivable and allowance for
doubtful accounts, goodwill, capitalization and useful lives associated with our intangible assets, income taxes, stock-based
compensation, discontinued operations and the recoverability of our long-lived assets including our media content portfolio, have the
greatest potential impact on our consolidated financial statements. Therefore, we consider these to be our critical accounting policies
and estimates.
Revenue Recognition
We recognize revenue when four basic criteria are met: persuasive evidence of a sales arrangement exists; performance of
services has occurred; the sales price is fixed or determinable; and collectability is reasonably assured. We consider persuasive
evidence of a sales arrangement to be the receipt of a signed contract. Collectability is assessed based on a number of factors,
including transaction history and the credit worthiness of a customer. If it is determined that collection is not reasonably assured,
revenue is not recognized until collection becomes reasonably assured, which is generally upon receipt of cash. We record cash
received in advance of revenue recognition as deferred revenue.
For arrangements with multiple deliverables, we allocate revenue to each deliverable if the delivered item(s) has value to the
customer on a standalone basis and, if the arrangement includes a general right of return relative to the delivered item, delivery or
performance of the undelivered item(s) is considered probable and substantially in our control. The fair value of the selling price for a
deliverable is determined using a hierarchy of (1) Company specific objective and reliable evidence, then (2) third-party evidence,
then (3) best estimate of selling price. We allocate any arrangement fee to each of the elements based on their relative selling prices.
Accounts Receivable and Allowance for Doubtful Accounts
We maintain an allowance for doubtful accounts to reserve for potentially uncollectible receivables from our customers based
on our best estimate of the amount of probable losses from existing accounts receivable. We determine the allowance based on an
analysis of historical bad debts, advertiser concentrations, advertiser credit-worthiness and current economic trends. In addition, past
due balances over 60 days and specific other balances are reviewed individually for collectability on at least a quarterly basis. During
the years ended December 31, 2014 and 2013, our allowance for doubtful accounts and bad debt expense were not significant and we
expect that this trend will continue in the near term.
Goodwill
Goodwill represents the excess of the cost of an acquired entity over the fair value of the acquired net assets. Goodwill is tested
for impairment annually during the fourth quarter of our fiscal year or when events or circumstances change in a manner that indicates
goodwill might be impaired. Events or circumstances that could trigger an impairment review include, but are not limited to, a
significant adverse change in legal factors or in the business climate, an adverse action or assessment by a regulator, unanticipated
competition, a loss of key personnel, significant changes in the manner of our use of the acquired assets or the strategy for our overall
business, significant negative industry or economic trends, a decline in our stock price leading to an extended period when our market