Stamps.com 2011 Annual Report Download - page 56

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STAMPS.COM INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Description of Business
Stamps.com Inc. and Subsidiary (“the Company” or “we”) are the leading provider of Internet-
based postage solutions. Our customers use our
service to mail and ship a variety of mail pieces, including postcards, envelopes, flats and packages, using a wide range of United States Postal
Service (the “USPS”) mail classes, including First Class Mail®, Priority Mail®, Express Mail®, Media Mail®, Parcel Post®,
and others. Our
customers include individuals, small businesses, home offices, medium-
size businesses and large enterprises, and within these segments we
target both mailers and shippers. We were the first ever USPS-licensed vendor to offer PC Postage® in a software-
only business model in 1999.
2. Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of Stamps.com Inc. and PhotoStamps Inc. In October 2009, we formed PhotoStamps
Inc., a wholly-
owned subsidiary, for the purpose of managing our retail gift card operations. Because 100% of the voting control is held by us,
we have consolidated PhotoStamps Inc. in the accompanying consolidated financial statements. All significant intercompany accounts and
transactions have been eliminated.
Use of Estimates and Risk Management
The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires us to make estimates and
assumptions that affect the amounts reported in the financial statements and the accompanying notes. Actual results could differ from those
estimates, and such differences may be material to the financial statements. Examples include estimates of loss contingencies, promotional
coupon redemptions, the number of PhotoStamps retail boxes that will not be redeemed, deferred income taxes and estimates regarding the
useful lives of patents and other amortizable intangible assets.
Contingencies and Litigation
We are involved in various litigation matters as a claimant and a defendant. We record any amounts recovered in these matters when received.
We record liabilities for claims against us when the loss is probable and estimable. Amounts recorded are based on reviews by outside counsel,
in-house counsel and management. Actual results could differ from estimates.
Cash Equivalents and Investments
We consider all highly liquid investments with an original or remaining maturity of three months or less at the date of purchase to be cash
equivalents.
Our cash equivalents, restricted cash and investments consisted of money market funds, U.S. government obligations, asset-
backed securities
and public corporate debt securities at December 31, 2011 and 2010. All investments are classified as available for sale and are recorded at
market value using the specific identification method. Realized gains and losses are reflected in interest and other income, net while unrealized
gains and losses are included as a separate component of stockholders' equity.
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