Overstock.com 2012 Annual Report Download - page 96
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Table of Contents
From time to time, we grant credit to some of our business customers on normal credit terms (typically 30 days). We perform credit evaluations of
our business customers' financial condition and payment history and maintain an allowance for doubtful accounts receivable based upon our historical
collection experience and expected collectability of accounts receivable. The allowance for doubtful accounts receivable was $797,000 and $574,000 at
December 31, 2012 and December 31, 2011, respectively.
Cash equivalents include short-term, highly liquid instruments with maturities at date of purchase of three months or less. At December 31, 2012
and 2011, two banks held the majority of our cash and cash equivalents. We do not believe that, as a result of this concentration, we are subject to any
unusual financial risk beyond the normal risk associated with commercial banking relationships.
Financial instruments that potentially subject us to significant concentrations of credit risk consist primarily of cash equivalents and receivables. We
invest our cash primarily in money market securities which are uninsured.
Our accounts receivable are derived primarily from revenue earned from customers located in the United States. We maintain an allowance for
doubtful accounts based upon the expected collectability of accounts receivable.
Inventories, consisting of merchandise purchased for resale, are accounted for using a standard costing system which approximates the first-in-
first-out ("FIFO") method of accounting, and are valued at the lower of cost or market. We write down our inventory for estimated obsolescence and to
lower of cost or market value based upon assumptions about future demand and market conditions. If actual market conditions are less favorable than
those projected by management, additional inventory write-downs may be required. Once established, the original cost of the inventory less the related
inventory allowance represents the new cost basis of such products. Reversal of the allowance is recognized only when the related inventory has been
sold or scrapped.
Prepaid inventories represent inventories paid for in advance of receipt. Prepaid inventories at December 31, 2012 and 2011 were $1.9 million and
$1.0 million respectively.
Prepaids and other assets represent expenses paid prior to receipt of the related goods or services, including advertising, license fees, maintenance,
packaging, insurance, and other miscellaneous costs, as well as investments in precious metals. Total prepaids and other assets at December 31, 2012
and 2011 were $12.9 million and $12.7 million, respectively.
F-9