Overstock.com 2010 Annual Report Download - page 103

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Table of Contents
Overstock.com, Inc.
Notes to Consolidated Financial Statements (Continued)
2. ACCOUNTING POLICIES (Continued)
defer the commencement date of required payments. Additionally, tenant improvement allowances are amortized as a reduction in rent expense over the term
of the lease. Leasehold improvements are capitalized at cost and amortized over the lesser of their expected useful life or the life of the lease, without
assuming renewal features, if any, are exercised.
Treasury stock
We account for treasury stock under the cost method and include treasury stock as a component of stockholders' equity (deficit).
Other long-term assets
Other long-term assets include long-term prepaid expenses and deposits.
Impairment of long-lived assets
We review property and equipment and other long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable. Recoverability is measured by comparison of the assets' carrying amount to future undiscounted net cash flows the
assets are expected to generate. Cash flow forecasts are based on trends of historical performance and management's estimate of future performance, giving
consideration to existing and anticipated competitive and economic conditions. If such assets are considered to be impaired, the impairment to be recognized
is measured by the amount by which the carrying amount of the assets exceeds their fair values. We did not record any impairment of long-lived assets during
2010, 2009 and 2008.
Goodwill
Goodwill represents the excess of the purchase price paid over the fair value of the tangible net assets acquired in business combinations.
Goodwill is not amortized but is tested for impairment at least annually. When evaluating whether goodwill is impaired, we compare the fair value of the
reporting unit to which the goodwill is assigned to its carrying amount. If the carrying amount exceeds its fair value, then the amount of the impairment loss
must be measured. The impairment loss, if any, is calculated by comparing the implied fair value of the goodwill to its carrying amount. In calculating the
implied fair value of goodwill, the fair value of the reporting unit is allocated to the other assets and liabilities within the reporting unit based on fair value.
The excess of the fair value of a reporting unit over the amount allocated to its other assets and liabilities is the implied fair value of goodwill. An impairment
loss is recognized when the carrying amount of goodwill exceeds its implied fair value.
We performed an evaluation of the goodwill associated with the reporting unit as of December 31, 2010, 2009 and 2008 and determined that no
impairment charge should be recorded.
Revenue recognition
We derive revenue primarily from two sources: direct revenue and fulfillment partner revenue, including listing fees and commissions collected from
products being listed and sold through the Auctions tab of our Website, advertisement revenue derived from our cars and real estate listing
F-14