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STAMPS.COM INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Website Development Costs
We develop and maintain our website. Costs associated with the operation of our website consist primarily of software and hardware purchased
from third parties and administrative cost relating to the maintenance and development of the website. Costs related to the purchase of software
and hardware are capitalized based on our capitalization policy. These capitalized costs are amortized based on their estimated useful life.
Administrative costs related to the maintenance and development of our website are expensed as incurred.
Recent Accounting Pronouncements
In May 2011, the FASB issued Accounting Standards Update (“ASU”) No. 2011-04, Fair Value Measurement (Topic 820) –
Amendments to
Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS
, which amends ASC 820 providing consistent
guidance on fair value measurement and disclosure requirements between U.S. GAAP and International Financial Reporting Standards. ASU
2011-04 is effective for fiscal years beginning after December 15, 2011. We do not expect the adoption of ASU 2011-
04 will have a material
impact on our consolidated financial statements.
In September 2011, the FASB issued ASU No. 2011-08 , Intangibles – Goodwill and Other (Topic 350) – Testing Goodwill for Impairment
,
which amends ASC 350 to first assess qualitative factors before performing the quantitative goodwill impairment testing. ASU 2011-
08 is
effective for fiscal years beginning after December 15, 2011. We do not expect the adoption of ASU 2011-
08 will have a material impact on our
consolidated financial statements.
3. Intangible Assets
We have amortizable and non-
amortizable intangible assets consisting of patents, trademarks and other intellectual property with a gross
carrying value of $8.7 million as of December 31, 2011 and 2010 and accumulated amortization of $7.8 million as of December 30, 2011 and
2010. During 2010 we purchased two patents for $400,000 in connection with our settlement agreement with Kara Technology Incorporated and
Mr. Salim Kara to resolve all outstanding litigation among the parties. The expected useful lives of our amortizable intangible assets range from
approximately 9 to 17 years.
The weighted average amortization period for our amortizable intangible assets is 7.4 years. During 2011, we
assessed whether events or changes in circumstances occurred that could potentially indicate that the carrying amount of our intangible assets
may not be recoverable. We concluded that there were no such events or changes in circumstances during 2011 and determined that the fair
value of our intangible assets was in excess of their carrying value as of December 31, 2011. Aggregate amortization expense on patents and
trademarks was approximately $47,000, $13,000 and $6,000 for the years ended December 31, 2011, 2010 and 2009, respectively. Our expected
yearly amortization expense for the next five years is approximately $47,000.
4. Cash, Cash Equivalents and Investments
Our cash equivalents, restricted cash and investments consist of money market, U.S. government obligations, asset-
backed securities and public
corporate debt securities at December 31, 2011 and 2010. 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. All investments are classified as available for sale and are recorded at market
value using the specific identification method. Unrealized gains and losses are included as a separate component of stockholders' equity. We
have ten securities with a total fair value of $2.6 million that have unrealized losses of approximately $47,000 as of December 31, 2011. We do
not intend to sell investments with amortized cost basis exceeding fair value, and it is not likely that we will be required to sell the investments
before recovery of their amortized cost basis. Realized gains and losses are reflected in interest income and other income, net using the specific
identification method.
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