Pitney Bowes 2007 Annual Report Download - page 60

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PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular dollars in thousands, except per share data)
1. Description of Business and Summary of Significant Accounting Policies
Description of Business
We are a provider of leading-edge, global, integrated mail and document management solutions for organizations of all sizes.
We operate in two business groups: Mailstream Solutions and Mailstream Services. We operate both inside and outside the
United States. See Note 19 to the Consolidated Financial Statements for financial information concerning revenue, earnings
before interest and taxes (EBIT) and identifiable assets, by reportable segment and geographic area.
Basis of Presentation and Consolidation
We have prepared the Consolidated Financial Statements of the Company in conformity with accounting principles generally
accepted in the United States of America (GAAP). Operating results of acquired companies are included in the Consolidated
Financial Statements from the date of acquisition. Intercompany transactions and balances have been eliminated in
consolidation.
Use of Estimates
The preparation of the Consolidated Financial Statements in conformity with GAAP requires us to make estimates and
assumptions that affect the amounts of assets, liabilities, revenues and expenses that are reported in the Consolidated
Financial Statements and accompanying disclosures, including the disclosure of contingent assets and liabilities. These
estimates are based on our best knowledge of current events, historical experience, actions that we may undertake in the
future, and on various other assumptions that are believed to be reasonable under the circumstances. As a result, actual
results could differ from those estimates and assumptions.
Cash Equivalents and Short-Term Investments
Cash equivalents include short-term, highly liquid investments with maturities of three months or less at the date of
acquisition. We place our temporary cash and highly liquid short-term investments with a maturity of greater than three
months but less than one year from the reporting date with financial institutions or investment managers and/or invest in
highly rated short-term obligations.
Accounts Receivable and Allowance for Doubtful Accounts
We estimate our accounts receivable risks and provide allowances for doubtful accounts accordingly. We believe that our
credit risk for accounts receivable is limited because of our large number of customers and the relatively small account
balances for most of our customers. Also, our customers are dispersed across different business and geographic areas. We
evaluate the adequacy of the allowance for doubtful accounts on a periodic basis. The evaluation includes historical loss
experience, length of time receivables are past due, adverse situations that may affect a customer’ s ability to repay and
prevailing economic conditions. We make adjustments to our allowance if the evaluation of allowance requirements differs
from the actual aggregate reserve. This evaluation is inherently subjective and estimates may be revised as more information
becomes available.
Allowance for Credit Losses
We estimate our finance receivables risks and provide allowances for credit losses accordingly. Our financial services
businesses establish credit approval limits based on the credit quality of the customer and the type of equipment financed.
We charge finance receivables through the allowance for credit losses after collection efforts are exhausted and we deem the
account uncollectible. Our financial services businesses base credit decisions primarily on a customer’ s financial strength
and we may also consider collateral values. We believe that our concentration of credit risk for finance receivables in our
internal financing division is limited because of our large number of customers, small account balances and customer
geographic and industry diversification.
Our general policy for finance receivables contractually past due for over 120 days is to discontinue revenue recognition. We
resume revenue recognition when payments reduce the account to 60 days or less past due.
We evaluate the adequacy of allowance for credit losses on a periodic basis. Our evaluation includes historical loss
experience, the nature and volume of its portfolios, adverse situations that may affect a customer’ s ability to repay, and
prevailing economic conditions. We make adjustments to our allowance for credit losses if the evaluation of reserve
requirements differs from the actual aggregate reserve. This evaluation is inherently subjective and estimates may be revised
as more information becomes available.