Pandora 2016 Annual Report Download - page 86

accounted for 10% or more of our total accounts receivable.
Cash, Cash Equivalents and Investments
We classify our highly liquid investments with maturities of three months or less at the date of purchase as cash
equivalents. Our investments consist of commercial paper, corporate debt securities and U.S. government and government
agency debt securities. These investments are classified as available-for-sale securities and are carried at fair value with the
unrealized gains and losses reported as a component of stockholders' equity. Management determines the appropriate
classification of our investments at the time of purchase and reevaluates the available-for-sale designations as of each balance
sheet date. We classify our investments as either short-term or long-term based on each instrument's underlying contractual
maturity date. Investments with maturities of twelve€months or less are classified as short-term and those with maturities
greater than twelve€months are classified as long-term. The cost basis for investments sold is based upon the specific
identification method.
Accounts Receivable and Allowance for Doubtful Accounts
Accounts receivable are recorded net of an allowance for doubtful accounts. Our allowance for doubtful accounts 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. We also consider any changes to the financial condition of our customers and any other
external market factors that could impact the collectability of our receivables in the determination of our allowance for doubtful
accounts. Accounts receivable amounts that are deemed uncollectable are charged against the allowance for doubtful accounts
when identified.
Property and Equipment, net
Property and equipment is recorded at cost, less accumulated depreciation and amortization. Depreciation is computed
using the straight-line method based on the estimated useful lives of the assets, which typically range from three to five years.
Leasehold improvements are amortized over the shorter of the lease term or expected useful lives of the improvements.
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Property and equipment is reviewed for impairment whenever events or changes in circumstances indicate the carrying
amount of an asset may not be recoverable. Recoverability of these assets is measured by a comparison of the carrying amounts
to the future undiscounted cash flows the assets are expected to generate. If property and equipment are considered to be
impaired, the impairment to be recognized equals the amount by which the carrying value of the asset exceeds its fair market
value. If we reduce the estimated useful life assumption for any asset, the remaining unamortized balance would be amortized
or depreciated over the revised estimated useful life.
Costs incurred to develop software for internal use are required to be capitalized and amortized over the estimated useful
life of the asset if certain criteria are met. Costs related to preliminary project activities and post implementation activities are
expensed as incurred. We evaluate the costs incurred during the application development stage of website development to
determine whether the costs meet the criteria for capitalization. As of December€31, 2014 and 2015, we had approximately $2.8
million and $6.3 million of capitalized internal use software and website development costs, net of accumulated amortization.
These costs are being amortized over their three-year estimated useful lives. Internal use software and website development
costs are included in property and equipment.
Ticketing Contract Advances
Ticketing contract advances, which are either recoupable or non-recoupable, represent amounts paid in advance to clients
pursuant to ticketing agreements. These amounts are reflected in prepaid expenses and other current assets if the amount is
expected to be recouped or recognized over a period of twelve months or less or in other long-term assets if the amount is
expected to be recouped or recognized over a period of more than twelve months. Recoupable ticketing contract advances are
generally recoupable against future royalties earned by clients, based on the contract terms, over the lives of their contracts
which typically range between three and five years. Non-recoupable ticketing contract advances are fixed incentives paid by
Ticketfly to secure exclusive rights with certain clients and are amortized to sales and marketing expense over the life of the
contract on a straight-line basis. Amortization expense for the two months ended December€31, 2015 was $0.7 million.
We maintain an allowance for doubtful accounts to reserve for recoupable ticketing contract advances that we potentially
do not expect to recoup. Our allowance is based on historical loss patterns, the aging of balances and known factors about
customers’ current financial conditions.
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