Travelzoo 2004 Annual Report Download - page 54

TRAVELZOO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
results of operations and cash Öows of Travelzoo Inc. are identical to the combined results of Travelzoo.com
Corporation and Travelzoo Inc.
(b) Revenue Recognition
Substantially all revenue consists of advertising sales. Advertising revenues are derived from the sale of
advertising on the Travelzoo Web site, in the Travelzoo Top 20 e-mail newsletter, in NewsÖash, and in
SuperSearch.
The Company recognizes revenues in accordance with Securities and Exchange Commission StaÅ
Accounting Bulletin No. 104, Revenue Recognition. Advertising revenues are recognized in the period in
which the advertisement is displayed, provided that evidence of an arrangement exists, the fees are Ñxed or
determinable and collection of the resulting receivable is reasonably assured. Where collectibility is not
reasonably assured, the revenue will be recognized upon cash collection, provided that the other criteria for
revenue recognition have been met. The Company recognizes revenue for Ñxed-fee advertising arrangements
ratably over the term of the insertion order. The majority of insertion orders have terms that begin and end in a
quarterly reporting period. In the cases where at the end of a quarterly reporting period the term of an insertion
order is not complete, the Company recognizes revenue for the period by pro-rating the total arrangement fee
to revenue and deferred revenue based on a measure of proportionate performance of its obligation under the
insertion order. The Company measures proportionate performance by the number of placements delivered
and undelivered as of the reporting date. The Company uses prices stated on its internal rate card for
measuring the value of delivered and undelivered placements. Fees for variable-fee advertising arrangements
are recognized based on the number of impressions 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 reasonably assured. The
Company evaluates each of these criteria as follows:
‚Evidence of an arrangement. The Company considers an 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 click-throughs have been delivered.
‚Fixed or determinable fee. The Company considers the fee to be Ñxed or determinable if the fee is not
subject to refund or adjustment and payment terms are standard.
‚Collection is deemed reasonably assured. The Company conducts a credit review for all transactions
at the time of the arrangement to determine the creditworthiness of the client. Collection is deemed
reasonably assured if it is expected that the client will be able to pay amounts under the arrangement as
payments become due. If it is determined that collection is not reasonably assured, then revenue is
deferred and recognized upon cash collection. Collection is deemed not reasonably assured when a
client is perceived to be in Ñnancial distress, which may be evidenced by weak industry conditions, a
bankruptcy Ñling, or previously billed amounts that are past due.
During the year ended December 31, 2004, the Company recognized $0 in revenue on a cash-received
basis from the year ended December 31, 2003. As of December 31, 2004, the Company deferred recognition of
$19,774 of advertising delivered during the year ended December 31, 2004 for which collectibility was not
reasonably assured. Such revenue will be recognized in future periods when and if collected.
The Company's standard payment terms are 30 days net. The Company invoices its clients monthly.
Insertion orders that include Ñxed-fee advertising are invoiced upon acceptance of the order and on the Ñrst
day of each month included in the term of the insertion order. Insertion orders that include variable-fee
advertising are invoiced at the end of the month. The Company's standard terms state that in the event that
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