Travelzoo 2010 Annual Report Download - page 76

be held and used if the carrying amount of a long-lived asset group is not recoverable from its undiscounted cash
flows. The amount of the impairment loss is measured as the difference between the carrying amount and the fair
value of the asset group. Assets to be disposed of are reported at the lower of the carrying amount or fair value less
costs to sell. The Company evaluates long-lived assets for impairment whenever events or changes in circumstances
indicate the carrying value of an asset may not be recoverable. No impairment loss was recognized during the year
ended December 31, 2010.
(l) Stock-Based Compensation
The Company accounts for its employee stock options under the fair value method, which requires stock-based
compensation to be estimated using the fair value on the date of grant using an option-pricing model. The value of
the portion of the award that is expected to vest is recognized as expense over the related employees’ requisite
service periods in the Company’s Condensed Consolidated Statements of Income.
The Company recorded $750,000 and $94,000 stock-based compensation expense for fiscal years 2010 and
2009, respectively, and did not record any stock-based compensation expense in fiscal years 2008. See Note 7 for a
further discussion on stock-based compensation.
(m) Foreign Currency
All foreign subsidiaries use the local currency of their respective countries as their functional currency. Assets
and liabilities are translated into U.S. dollars at exchange rates prevailing at the balance sheet dates. Revenues, costs
and expenses are translated into U.S. dollars at average exchange rates for the period. Gains and losses resulting
from translation are recorded as a component of accumulated other comprehensive income (loss).
Realized gains and losses from foreign currency transactions are recognized as gain or loss on foreign currency
in the consolidated statements of operations.
(n) Certain Risks and Uncertainties
The Company’s cash, cash equivalents and accounts receivable are potentially subject to concentration of
credit risk. Cash and cash equivalents are placed with financial institutions that management believes are of high
credit quality. The accounts receivable are derived from revenue earned from customers located in the U.S. and
internationally. As of December 31, 2010 and December 31, 2009, the Company did not have any customers that
accounted for 10% or more of its accounts receivable.
The Company maintains an allowance for doubtful accounts based upon its historical experience, the age of the
receivable and customer specific information. Determining appropriate allowances for these losses is an inherently
uncertain process, and ultimate losses may vary from the current estimates. The allowance for doubtful accounts
was $386,000 and $501,000 at December 31, 2010 and 2009, respectively.
(o) Recent Accounting Pronouncements
In June 2009, the FASB issued a new accounting standard that changes the consolidation model for variable
interest entities. The new accounting standard requires a company to perform qualitative analysis when determining
whether it must consolidate a variable interest entity and ongoing reassessments to determine if a company must
consolidate a variable interest entity. The new accounting standard also requires a company to provide additional
disclosures about the nature of restrictions on a consolidated variable interest entity’s assets, its involvement with
variable interest entities, any significant changes in risk exposure due to that involvement and how its involvement
with a variable interest entity affects the company’s financial statements. A company will also be required to
disclose any significant judgments and assumptions made in determining whether it must consolidate a variable
interest entity. Effective January 1, 2010, the Company adopted this new accounting standard. The adoption of this
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TRAVELZOO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)