Overstock.com 2005 Annual Report Download - page 82

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Overstock.com, Inc.
Notes to Consolidated Financial Statements (Continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Property and equipment
Property and equipment, which includes capitalized leases, are recorded at cost and depreciated using the straight-line method
over the estimated useful lives of the related assets or the term of the related lease, whichever is shorter, as follows:
Years
Computer software 3
Computer hardware 3-5
Furniture and equipment 3-5
Leasehold improvements are amortized over the shorter of the term of the related leases or estimated service lives. Upon sale or
retirement of assets, cost and related accumulated depreciation are removed from the balance sheet and the resulting gain or loss is
reflected in the consolidated statement of operations.
Internal use software
The Company expenses all costs incurred for the development of internal use software that relate to the planning and post-
implementation phases of development. Direct costs incurred in the development phase are capitalized and recognized over the
software's estimated useful life of 3 years. Research and development costs and other computer software maintenance costs related to
software development are expensed as incurred.
Asset Retirement Obligation
In accordance with the Financial Accounting Standards Board ("FASB") Statement of Financial Accounting Standard ("SFAS")
No. 143, Accounting for Asset Retirement Obligations, the Company establishes assets and liabilities for the present value of
estimated future costs to return certain of our leased facilities to their original condition. Such assets are depreciated over the lease
period into operating expense, and the recorded liabilities are accreted to the future value of the estimated restoration costs. At
December 31, 2005 and 2004, such amounts are not significant.
Other long-term assets
Other long-term assets include deposits, intangibles, deferred financing and issuance costs and the fees associated with the
acquisition of Overstock.com and other related domain names. The cost of the domain names is being amortized using the straight-line
method over 5 years.
Goodwill
Goodwill of $2.8 million and $10.4 million was recorded for the purchase of Gear.com in 2000 and Ski West, Inc. in 2005,
respectively, and represents the excess of the purchase price paid over the fair value of the tangible net assets acquired.
In accordance with Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets, goodwill is not
amortized but tested for impairment at least annually. The Company
F-12