Stamps.com 2013 Annual Report Download - page 59

STAMPS.COM INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
On January 23, 2012, we completed the purchase of our new corporate headquarters in El Segundo, California, for an aggregate purchase price
of $13.4 million of which approximately $7.2 million was allocated to land value and $5.5 million was allocated to building value. The purchase
was accounted for as a business combination. The building is being depreciated on a straight-
line basis over the estimated useful life of 40 years;
the land is an asset that does not get depreciated. As a result of the purchase we also acquired existing leases of building tenants, and $700,000
of the initial purchase price was allocated to lease-in-place intangible assets and is being amortized over the remaining actual lease terms which
are as long as 5.5 years.
Trademarks, Patents and Intangible Assets
Acquired trademarks, patents and other intangibles are included in intangible assets, net in the accompanying consolidated 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 approximately 5 to 17 years. During
2013, 2012 and 2011, amortization expense, including the amortization of trademarks, patents and lease-in-place intangible asset, was
approximately $215,000, $269,000 and $47,000, respectively.
Impairment of Long
-Lived Assets and Intangible Assets
Long-lived assets including intangible assets with definitive useful lives 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 to future net cash flows expected to be generated by the asset. If such assets are considered to be
impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the
assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell.
Intangible assets that have indefinite useful lives are not amortized but, instead, tested at least annually for impairment while intangible assets
that have finite useful lives continue to be amortized over their respective useful lives.
Intangible assets are tested for impairment using a two-
step process. The first step is to determine the fair value of the reporting unit, which may
be calculated using a discounted cash flow methodology, and compare this value to its carrying value. If the fair value exceeds the carrying
value, no further work is required, and no impairment loss would be recognized. If the fair value is less than the carrying value, the second step
is performed. The second step is an allocation of the fair value of the reporting unit to all of the reporting unit's assets and liabilities under a
hypothetical purchase price allocation. Based on the annual evaluations performed by us, there was no impairment of intangible assets during
the years ended December 31, 2013, 2012 or 2011.
Deferred Revenue
The majority of our deferred revenue relates to PhotoStamps retail boxes. We sell our PhotoStamps retail boxes to our customers through our
website and selected third parties. Proceeds from the sale of our PhotoStamps retail boxes are initially recorded as a liability when received. We
record the liability for outstanding PhotoStamps retail boxes in deferred revenue.
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