Tucows 2013 Annual Report Download - page 86

treasury stock method is used to determine the number of shares assumed to be purchased from the conversion of common
share equivalents or the proceeds of the exercise of options.
(q) Concentration of credit risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash
equivalents, accounts receivable and forward foreign exchange contracts. Cash equivalents consist of deposits with major
commercial banks, the maturities of which are three months or less from the date of purchase. With respect to accounts
receivable, the Company performs periodic credit evaluations of the financial condition of its customers and typically does
not require collateral from them. The counterparty to any forward foreign exchange contracts is a major commercial bank
which management believes does not represent a significant credit risk. Management assesses the need for allowances for
potential credit losses by considering the credit risk of specific customers, historical trends and other information. No
customer accounted for more than 10% of revenue in 2013, 2012 or 2011. No customers accounted for 10% of accounts
receivable at December 31, 2013, no customer accounted for 10% of accounts receivable at December 31, 2012, and one
customer accounted for 16% of accounts receivable at December 31, 2011. All of these accounts receivable have
subsequently been collected.
F-12
(r) Fair values of financial assets and financial liabilities
The fair value of cash and cash equivalents, restricted cash, accounts receivable, accounts payable, accreditation fees
payable, customer deposits and accrued liabilities (level 2 measurements) approximate their carrying values due to the
relatively short periods to maturity of the instruments.
The fair value of the forward exchange contracts are determined using an estimated credit-adjusted mark-to-market
valuation (a level 2 measurement) which takes into consideration the Company and the counterparty credit risk.
(s) Segment reporting
The Company operates in two business segments, Domain Services and Network Access Services.
The Company’s revenues are attributed to the country in which the contract originates, primarily Canada. Revenues
from domain names issued from the Toronto, Canada location are attributed to Canada because it is impracticable to
determine the country of the customer.
The Company’s assets are located in Canada, the United States, Germany and the Netherlands. All of the
Company’s goodwill and intangible assets are allocated to the Domain Services business segment.
Recent Accounting Pronouncements Adopted
Testing Indefinite-Lived Intangible Assets for Impairment
On January 1, 2013, the Company adopted Accounting Standards Update No. 2012-02, Intangibles —Goodwill and
Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment (“ASU 2012-02”) which allows entities to use
a qualitative approach to test indefinite-lived intangible assets for impairment. ASU 2012-02 allows an entity to first perform
a qualitative assessment to determine whether it is more likely than not that the indefinite-lived intangible asset is impaired.
If an entity concludes that this is the case, it is required to determine the fair value of the indefinite-lived intangible asset and
perform the quantitative impairment test by comparing the fair value with the carrying amount. The adoption of ASU 2012-
02 did not materially impact the carrying value of our recorded indefinite-lived intangible assets. The Company performed
its annual indefinite-lived intangible asset impairment test on December 31, 2013 using the market approach as described in
Note 2(f).
F-13
Reclassification Out of Accumulated Other Comprehensive Income