Overstock.com 2012 Annual Report Download - page 99

Table of Contents
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2011. There were no impairments to goodwill recorded during the years ended December 31, 2012, 2011, and 2010.
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We derive our revenue primarily from direct revenue and fulfillment partner revenue from merchandise sales. We also earn revenue from
advertising on our shopping and other pages, and previously from listing fees and commissions collected from products being listed and sold through
the Auctions tab, which we removed from our site in July 2011. We have organized our operations into two principal segments based on the primary
source of revenue: direct revenue and fulfillment partner revenue (see Note 22 "Business Segments").
Revenue is recognized when the following revenue recognition criteria are met: (1) persuasive evidence of an arrangement exists; (2) delivery has
occurred or the service has been provided; (3) the selling price or fee revenue earned is fixed or determinable; and (4) collection of the resulting
receivable is reasonably assured. Revenue related to merchandise sales is recognized upon delivery to our customers. As we ship high volumes of
packages through multiple carriers, it is not practical for us to track the actual delivery date of each shipment. Therefore, we use estimates to determine
which shipments are delivered and, therefore, recognized as revenue at the end of the period. Our delivery date estimates are based on average shipping
transit times, which are calculated using the following factors: (i) the type of shipping carrier (as carriers have different in-transit times); (ii) the
fulfillment source (either our warehouses or those of our fulfillment partners); (iii) the delivery destination; and (iv) actual transit time experience, which
shows that delivery date is typically one to eight business days from the date of shipment. We review and update our estimates on a quarterly basis
based on our actual transit time experience. However, actual shipping times may differ from our estimates.
We evaluate the criteria outlined in ASC Topic 605-45, , in determining whether it is appropriate to record the
gross amount of product sales and related costs or the net amount earned as commissions. When we are the primary obligor in a transaction, are subject
to inventory risk, have latitude in establishing prices and selecting suppliers, or have several but not all of these indicators, revenue is recorded gross. If
we are not the primary obligor in the transaction and amounts earned are determined using a fixed percentage, revenue is recorded on a net basis.
Currently, the majority of both direct revenue and fulfillment partner revenue is recorded on a gross basis, as we are the primary obligor. We present
revenue net of sales taxes.
We periodically provide incentive offers to our customers to encourage purchases. Such offers include current discount offers, such as percentage
discounts off current purchases and other similar offers, which, when used by customers, are treated as a reduction of revenue.
Based upon our historical experience, revenue typically increases during the fourth quarter because of the holiday retail season.
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Direct revenue is derived from merchandise sales to individual consumers and businesses that are fulfilled from our warehouses. Direct revenue
comes from merchandise sales that occur primarily through our Website, but may also occur through offline and other channels.
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