LinkedIn 2012 Annual Report Download - page 78

receivable balances. The allowance is based upon historical loss patterns, the number of days that billings
are past due, and an evaluation of the potential risk of loss associated with delinquent accounts. The
following table presents the changes in the allowance for doubtful accounts (in thousands):
Year Ended December 31,
2012 2011 2010
Allowance for doubtful accounts:
Balance, beginning of period ..................... $5,460 $2,672 $1,100
Add: bad debt expense (credit) .................... (176) 2,526 1,723
Less: write-offs, net of recoveries and other adjustments . (1,510) 262 (151)
Balance, end of period .......................... $3,774 $5,460 $2,672
Foreign Currency
The functional currency of the Company’s foreign subsidiaries is generally the U.S. dollar. Transaction
gains and losses are included in other income (expense), net in the accompanying consolidated statements
of operations. These gains and losses are net of those realized and unrealized on foreign currency forward
contracts.
Cash Equivalents
Cash equivalents consist of highly liquid short-term investments with original maturities of three
months or less at the time of purchase. As of December 31, 2012 and 2011, cash equivalents consisted of
money market funds and corporate debt securities. Cash equivalents are stated at fair value.
Short-term Investments
Short-term investments consist of U.S. treasury securities, U.S. agency securities, municipal securities
and corporate debt securities, and are classified as available-for-sale securities. As the Company views
these securities as available to support current operations, it has classified all available-for-sale securities
as short-term. Available-for-sale securities are carried at fair value with unrealized gains and losses
reported as a component of accumulated other comprehensive income (loss) in stockholders’ equity, while
realized gains and losses, and other-than-temporary impairments are reported as a component of net
income. For the periods presented, realized and unrealized gains and losses on investments were not
material. An impairment charge is recorded in the consolidated statements of operations for declines in
fair value below the cost of an individual investment that are deemed to be other than temporary. The
Company assesses whether a decline in value is temporary based on the length of time that the fair
market value has been below cost, the severity of the decline, as well as the intent and ability to hold, or
plans to sell, the investment. We did not identify any of our short-term investments as
other-than-temporarily impaired as of December 31, 2012 and 2011.
Deferred Commissions
Deferred commissions are the incremental costs that are directly associated with non-cancelable
subscription contracts primarily related to sales of the Company’s Talent Solutions. Deferred commissions
consist of sales commissions paid to the Company’s direct sales representatives and certain third-party
agencies and are deferred and amortized over the non-cancelable terms of the related customer contracts,
which are generally 12 months. The commission payments are generally paid in full the month after the
customer contract is signed. The deferred commission amounts are recoverable through the future
revenue streams under the non-cancelable customer contracts. The Company believes the commission
charges are so closely related to the revenue from the non-cancelable customer contracts that they should
be recorded as an asset and charged to expense over the same period that the subscription revenue is
recognized. Short-term deferred commissions are included in deferred commissions, while long-term
deferred commissions are included in other assets in the accompanying consolidated balance sheets. The
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