Redbox 2004 Annual Report Download - page 45

COINSTAR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS –(Continued)
YEARS ENDED DECEMBER 31, 2004, 2003, AND 2002
41
Based on identifiable intangible assets recorded as of December 31, 2004, and assuming no subsequent impairment of
the underlying assets, the annual estimated aggregate amortization expense will approximate $4.0 million in years 2005
through 2008 and approximately $3.4 million in years 2009 through 2014.
Impairment of Long-Lived Assets: Long-lived assets, such as property and equipment and purchased intangibles
subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the
carrying amount of an asset group to the estimated undiscounted future cash flows expected to be generated by the asset
group. If the carrying amount of an asset group exceeds its estimated future cash flows, an impairment charge is recognized
in the amount by which the carrying amount of the asset group exceeds the fair value of the asset group.
Revenue recognition: We recognize revenue as follows:
• Coin counting revenue is recognized at the time the consumers’ coins are counted by our coin-counting machines;
• Entertainment services revenue is recognized at the time cash is deposited in our machines. Cash deposited in the
machines that has not yet been collected is referred to as coin-in-machine and is estimated at period end and
reported on the balance sheet as cash being processed. This estimate is based on the average daily revenue per
machine, multiplied by the number of days since the coin in the machine has been collected;
• E-payment services revenue is recognized at the point of sale based on our commissions earned, net of retailer fees,
in accordance with Emerging Issues Task Force (“EITF”) 99-19, Reporting Revenue Gross as a Principal Versus
Net as an Agent.
Fees paid to retailers: Fees paid to retailers relate to the amount we pay our retail partners for the benefit of placing
our machines in their stores and their agreement to provide certain services on our behalf to our customers. The fee is
calculated as a percentage of each coin-counting transaction or as a percentage of our entertainment and vending revenue and
is recorded in our income statement under the caption “direct operating expenses.” The fee arrangements are based on our
evaluation of certain factors with the retailers such as total revenue, e-payment capabilities, long-term non-cancelable
contracts, installation of our machines in high traffic and/or urban or rural locations, new product commitments, or other
criteria. We recognize this expense at the time we recognize the associated revenue from each of our customer transactions.
This expense is recorded on a straight-line basis as a percentage of revenue based on estimated annual volumes.
Fair value of financial instruments: The carrying amounts for cash and cash equivalents approximate fair value,
which is the amount for which the instrument could be exchanged in a current transaction between willing parties. The fair
value of our variable rate debt, which includes our term loan, approximates its carrying amount. Our interest rate derivative is
carried at fair value, which is more fully described in Note 6.
Foreign currency translation: The functional currency of our International subsidiary is the British Pound Sterling.
We translate assets and liabilities related to these operations to U.S. dollars at the exchange rate in effect at the date of the
consolidated balance sheet; we convert revenues and expenses into U.S. dollars using the average monthly exchange rates.
Translation gains and losses are reported as a separate component of accumulated other comprehensive income.