Travelzoo 2003 Annual Report Download - page 55

TRAVELZOO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
transactions. SFAS No. 145 was eÅective for the Company beginning in 2003, and the eÅect of adoption did
not have a material impact on the consolidated Ñnancial statements.
In July 2002, the FASB issued Statement No. 146, Accounting for Costs Associated with Exit or Disposal
Activities. This Statement requires recording costs associated with exit or disposal activities at their fair values
when a liability has been incurred. Under previous guidance, certain exit costs were accrued upon
management's commitment to an exit plan, which is generally before an actual liability has been incurred. The
requirements of this Statement are eÅective prospectively for exit or disposal activities initiated after
December 31, 2002; however, early application of the Statement is encouraged. The Company's adoption of
Statement 146 did not have a material impact on the consolidated Ñnancial statements.
In November 2002, the FASB issued Interpretation No. 45, Guarantor's Accounting and Disclosure
Requirements for Guarantees, Including Guarantees of Indebtedness of Others (""FIN 45''). FIN 45 requires
us to recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken in the
issuance of the guarantee. The disclosure requirements eÅective for the year ending December 31, 2002,
expand the disclosures required by a guarantor about its obligation under a guarantee. The accounting
requirements for the initial recognition of guarantees are applicable on a prospective basis for guarantees
issued or modiÑed after December 31, 2002. The adoption of FIN 45 did not have a material impact on the
consolidated Ñnancial statements.
In December 2002, the Emerging Issues Task Force reached a consensus on Issue No. 00-21, Accounting
for Revenue Arrangements with Multiple Deliverables (""EITF Issue 00-21''). ETTF Issue 00-21 mandates
how to identify whether goods or services, or both, that are to be delivered separately in a bundled sales
arrangement should be accounted for as separate units of accounting. The consensus is eÅective prospectively
for our third quarter of 2003. The Company evaluated the guidance in EITF Issue 00-21 and concluded that
our advertising arrangements should continue to be accounted for as a single unit of accounting. As a result,
the adoption of EITF Issue 00-21 did not have a material impact on the revenue recognition policies or
consolidated Ñnancial statements.
In December 2003, the FASB issued Interpretation No. 46 (""FIN 46R'') (revised December 2003),
Consolidation of Variable Interest Entities, an Interpretation of Accounting Research Bulletin No. 51
(""ARB 51''), which addresses how a business enterprise should evaluate whether it has a controlling interest
in an entity through means other than voting rights and accordingly should consolidate the entity. FIN 46R
replaces FASB Interpretation No. 46 (""FIN 46'') , which was issued in January 2003. Before concluding that
it is appropriate to apply ARB 51 voting interest consolidation model to an entity, an enterprise must Ñrst
determine that the entity is not a variable interest entity (VIE). As of the eÅective date of FIN 46R, an
enterprise must evaluate its involvement with all entities or legal structures created before February 1, 2003, to
determine whether consolidation requirements of FIN 46R apply to those entities. There is no grandfathering
of existing entities. Public companies must apply either FIN 46 or FIN 46R immediately to entities created
after December 15, 2003 and no later than the end of the Ñrst reporting period that ends after March 15, 2004
for all other entities. The adoption of FIN 46R is not expected to have an eÅect on the Company's
consolidated Ñnancial statements.
In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial Instruments with
Characteristics of Both Liabilities and Equity (""SFAS 150'') that establishes standards on how an issuer
classiÑes and measures certain Ñnancial instruments with characteristics of both liabilities and equity.
SFAS No. 150 was eÅective for Ñnancial instruments entered into or modiÑed after May 31, 2003, and
otherwise was eÅective at the beginning of the Ñrst interim period beginning after June 15, 2003. On
November 7, 2003, Financial Accounting Standards Board StaÅ Position 150-3 was issued, which indeÑnitely
deferred the eÅective date of SFAS 150 for certain mandatory redeemable non-controlling interests. The
adoption of SFAS 150 had no eÅect on the Company's consolidated Ñnancial statements.
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