Travelzoo 2003 Annual Report Download - page 38

When evaluating the Ñnancial condition and operating performance of the Company, management
focuses on the following Ñnancial and non-Ñnancial indicators:
‚ Growth of number of subscribers of the Company's newsletters and page views of selected sections of
the Travelzoo website;
‚ Growth in revenues in the absolute and relative to the growth in reach of the Company's products;
‚ Pre-tax proÑtability;
‚ Revenue per employee as a measure of productivity.
Critical Accounting Policies
We believe that there are a number of accounting policies that are critical to understanding our historical
and future performance, as these policies aÅect the reported amounts of revenue and the more signiÑcant
areas involving management's judgments and estimates. These signiÑcant accounting policies relate to revenue
recognition, the allowance for doubtful accounts and recoverability of intangible assets. These policies, and our
procedures related to these policies, are described in detail below.
Revenue Recognition
We recognize advertising revenues in the period in which the advertisement is displayed, provided that
evidence of an arrangement exists, the fees are Ñxed or determinable, no signiÑcant obligations remain at the
end of the period, and collection of the resulting receivable is deemed probable. If Ñxed-fee advertising is
displayed over a term greater than one month, revenues are recognized ratably over the period. To the extent
that any minimum guaranteed impressions are not met during the contract period, the Company defers
recognition of the corresponding revenues until the guaranteed impressions are achieved. Fees for banner
advertising and other variable-fee advertising arrangements are recognized based on the number of impres-
sions displayed or clicks delivered during the period.
Under these policies, no revenue is recognized unless persuasive evidence of an arrangement exists,
delivery has occurred, the fee is Ñxed or determinable, and collection is deemed probable. The Company
evaluates each of these criteria as follows:
‚Evidence of an arrangement. We consider a non-cancelable insertion order signed by the client or its
agency to be evidence of an arrangement.
‚Delivery. Delivery is considered to occur when the advertising has been displayed and, if applicable,
the clickthroughs have been delivered.
‚Fixed or determinable fee. We consider the fee to be Ñxed or determinable if the fee is not subject to
refund or adjustment.
‚Collection is deemed probable. We conduct a credit review for all signiÑcant transactions at the time
of the arrangement to determine the creditworthiness of the client. Collection is deemed probable if we
expect that the client will be able to pay amounts under the arrangement as payments become due. If
we determine that collection is not probable, then we defer the revenue and recognize the revenue upon
cash collection.
Advertising sold to clients through agencies is generally reported at the net amount billed to the agency.
Allowance for Doubtful Accounts
We initially record a provision for doubtful accounts based on our historical experience of write-oÅs and
then adjust this provision at the end of each reporting period based on a detailed assessment of our accounts
receivable and allowance for doubtful accounts. In estimating the provision for doubtful accounts, manage-
ment considers the age of the accounts receivable, our historical write-oÅs, the creditworthiness of the client,
the economic conditions of the client's industry, and general economic conditions, among other factors.
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