Stamps.com 2009 Annual Report Download - page 58

TABLE OF CONTENTS
STAMPS.COM INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. Summary of Significant Accounting Policies – (continued)
We evaluate the collectibility of our accounts receivable based on a combination of factors. If we become 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 collectible from the customer. For all other customers, we recognize allowances for doubtful accounts
based on the length of time the receivables are past due, the current business environment and our historical experience. If the
financial condition of our customers deteriorates, resulting in their inability to make payments, additional provisions are
recorded in that period.
Fair Value of Financial Instruments
Carrying amounts of certain of our financial instruments, including cash, cash equivalents, restricted cash, accounts
receivable, and accounts payable, 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
Our cash, cash equivalents and investments are subject to market risk, primarily interest rate and credit risk. Our investments
are managed by a limited number of outside professional managers within investment guidelines set by us. Such guidelines
include security type, credit quality and maturity and are intended to limit market risk by restricting our investments. From time
to time, our investments held with financial institutions may exceed Federal Deposit Insurance Corporation insurance limits.
Interest rate fluctuations and changes in credit ratings impact the carrying value of the portfolio.
During 2009, 2008 and 2007, we did not recognize revenue from any one customer that represented 10% or more of
revenues.
As of December 31, 2009, we have accounts receivable from one customer that represented approximately 10% of the total
accounts receivable balance. As of December 31, 2008, we did not have accounts receivable from any one customer that
represented 10% or more of the total trade accounts receivable balance.
Inventories
Inventories consist of finished product sold through our supplies store and are accounted for using the lower of cost (first-in,
first-out (FIFO) method) or market. Inventories reported as a component of other current assets in 2009 and 2008 were $2.0
million and $2.8 million, respectively.
Property and Equipment
Property and equipment are stated at cost. Depreciation is computed principally on a straight-line method over the estimated
useful life of the asset, ranging from three to five years. Leasehold improvements are amortized over the term of the lease. We
have a policy of capitalizing expenditures that materially increase assets’ useful lives and charging 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
Acquired trademarks, patents and other intangibles are included in intangible assets, net in the accompanying balance sheets
and are carried at cost less accumulated amortization. Cost associated with internally developed intangible assets is typically
expensed as incurred as research and development costs.
Amortization is calculated on a straight-line basis over the estimated useful lives of the assets, ranging from 4 to 17 years.
During 2009, 2008 and 2007, amortization expense, including the amortization of trademarks and patents, was approximately
$6,000, $367,000 and $1.1 million, respectively.
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