Stamps.com 2005 Annual Report Download - page 48

STAMPS.COM INC.
NOTES TO FINANCIAL STATEMENTS (continued)
The Company evaluates the collectibility of its accounts receivable based on a combination of factors. If the Company becomes aware of a
customer’
s inability to meet its financial obligations, an allowance is recorded to reduce the net receivable to the amount reasonably believed to
be collectable from the customer. For all other customers, the Company recognizes allowances for doubtful accounts based on the length of
time the receivables are past due, the current business environment and their historical experience. If the financial condition of the Company’s
customers were to deteriorate, resulting in their inability to make payments, additional provisions are recorded in that period.
Fair Value of Financial Instruments
Carrying amounts of certain of the Company’s financial instruments, including cash, cash equivalents, restricted cash, short-term
investments, accounts receivable, notes receivable, accrued payroll, and other accrued liabilities, approximate fair value due to their short
maturities. The fair values of investments are determined using quoted market prices for those securities or similar financial instruments.
Concentration of Risk
The Company’s investments are subject to market risk, primarily interest rate and credit risk. The Company’s investments are managed by
a limited number of outside professional managers within investment guidelines set by the Company. Such guidelines include security type,
credit quality and maturity and are intended to limit market risk by restricting the Company’s investments. Investments are held with high-
quality financial institutions, government and government agencies, and corporations, thereby reducing credit risk and credit risk
concentrations. From time to time, the Company's investments held with its financial institutions may exceed Federal Deposit Insurance
Corporation insurance limits. Interest rate fluctuations impact the carrying value of the portfolio.
For the years ended December 31, 2005, 2004 and 2003 the Company did not recognize revenue from any one customer that represented
10% or more of revenues.
As of December 31, 2005 and 2004, the Company did not have trade accounts receivable from any one customer that represented 10% or
more of the total trade accounts receivable balance and does not require collateral.
Reclassifications
Certain reclassifications have been made to prior year amounts to conform to current year presentations.
Property and Equipment
Property and equipment are stated at cost. Depreciation and amortization are computed principally on a straight-line method over the
estimated useful life of the asset, ranging from three to five years. The Company has a policy of capitalizing expenditures that materially
increase assets’ useful lives and charges ordinary maintenance and repairs to operations as incurred. When property or equipment is disposed
of, the cost and related accumulated depreciation and amortization are removed from the accounts and any gain or loss is included in
operations.
Trademarks and Patents
Trademarks, patents and other intangibles are included in intangible assets, net in the accompanying balance sheets and are carried at cost
less accumulated amortization.
Amortization is calculated on a straight-line basis over the estimated useful lives of the assets, ranging from 4 to 17 years. During the
twelve months ended December 31, 2005, 2004 and 2003, amortization expense including the amortization of trademarks and patents, was
approximately $1.1 million per year.
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