Vistaprint 2013 Annual Report Download - page 60

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losses in existing accounts receivable. Account balances are charged off against the allowance when the potential
for recovery is considered remote.
Inventories
Inventories consist primarily of raw materials and are recorded at the lower of cost or market value using a
first-in, first-out method. Costs to produce free products are included in cost of revenues as incurred.
Property, Plant and Equipment
Property, plant and equipment are stated at cost less accumulated depreciation and amortization. Additions
and improvements that substantially extend the useful life of a particular asset are capitalized while repairs and
maintenance costs are expensed as incurred. Assets that qualify for the capitalization of interest cost during their
construction period are evaluated on a per project basis and, if material, the costs are capitalized. No interest costs
associated with our construction projects were capitalized in fiscal 2013 or 2012 as the amounts were not material.
Depreciation of plant and equipment is recorded on a straight-line basis over the estimated useful lives of the
assets.
Software and Web Site Development Costs
We capitalize eligible salaries and payroll-related costs of employees who devote time to the development
of websites and internal-use computer software. Capitalization begins when the preliminary project stage is
complete, management with the relevant authority authorizes and commits to the funding of the software project,
and it is probable that the project will be completed and the software will be used to perform the function intended.
These costs are amortized on a straight-line basis over the estimated useful life of the software. As of July 1, 2012,
we revised the estimated useful life of our capitalized software and website developments costs from 2 to 3 years
based on an evaluation of historical trends, the period of benefit of past projects, and our current project portfolio.
This change in estimated useful life increased our pre-tax income for fiscal year ended June 30, 2013 by
approximately $2,718 when compared to the historical estimated useful life and could have a material impact in the
future. Costs associated with preliminary stage software development, repair, maintenance or the development of
website content are expensed as incurred.
Amortization of previously capitalized amounts in the years ended June 30, 2013, 2012 and 2011 was
$3,118, $6,325 and $6,653, respectively, resulting in accumulated amortization of $10,315 and $11,864 at June 30,
2013 and 2012, respectively.
Leases
We categorize leases at their inception as either operating or capital leases. Costs for operating leases that
include incentives such as payment escalations or rent abatements are recognized on a straight-line basis over the
term of the lease. Additionally, inducements received are treated as a reduction of our costs over the term of the
agreement. Leasehold improvements are capitalized at cost and amortized over the shorter of their expected useful
life or the life of the lease, excluding renewal periods.
Intangible Assets
We capitalize the costs of purchasing patents from unrelated third parties and amortize these costs over
the estimated useful life of the patent. The costs related to patent applications, pursuing others who we believe
infringe on our patents, and defending against patent-infringement claims are expensed as incurred.
We record acquired intangible assets at fair value on the date of acquisition and amortize such assets
using the straight-line method over the expected useful life of the asset, unless another amortization method is
deemed to be more appropriate. We evaluate the remaining useful life of intangible assets on a periodic basis to
determine whether events and circumstances warrant a revision to the remaining useful life. If the estimate of an
intangible asset’s remaining useful life is changed, we amortize the remaining carrying value of the intangible asset
prospectively over the revised remaining useful life.
Form 10-K