Vistaprint 2013 Annual Report Download - page 63

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60
redomiciliation of our publicly traded parent company from Bermuda to the Netherlands in August 2009. The
cancellation of the treasury shares resulted in a reduction of additional paid in capital and retained earnings.
Revenue Recognition
We generate revenue primarily from the sale and shipping of customized manufactured products, as well
as providing digital services, website design and hosting, email marketing services,order referral fees and other
third party offerings. We recognize revenue arising from sales of products and services when it is realized or
realizable and earned. We consider revenue realized or realizable and earned when it has persuasive evidence of
an arrangement, the product has been shipped or service rendered with no significant post-delivery obligations on
our part, the net sales price is fixed or determinable and collectability is reasonably assured. For subscription
services we recognize revenue for the fees charged to customers ratably over the term of the service arrangement.
Revenue is recognized net of discounts we offer to our customers as part of advertising campaigns. Revenues from
sales of prepaid orders on our websites are deferred until shipment of fulfilled orders or until the prepaid service has
been rendered.
For arrangements with multiple deliverables, we allocate revenue to each deliverable if the delivered item(s)
has value to the customer on a standalone basis and, if the arrangement includes a general right of return relative
to the delivered item, delivery or performance of the undelivered item(s) is considered probable and substantially
within our control. The fair value of the selling price for a deliverable is determined using a hierarchy of (1)
Company specific objective and reliable evidence, then (2) third-party evidence, then (3) best estimate of selling
price. We allocate any arrangement fee to each of the elements based on their relative selling prices.
Shipping, handling and processing costs billed to customers are included in revenue and the related costs
are included in cost of revenue. Sales and purchases in jurisdictions which are subject to indirect taxes, such as
value added tax (“VAT”), are recorded net of tax collected and paid as we act as an agent for the government.
We sell vouchers through discount voucher websites which do not have an expiration date. Upon issuance
of the voucher, a liability is established for its cash value. We relieve the liability and recognize revenue on a gross
basis, as we are the primary obligor, when redeemed items are shipped. Over time, some portion of these vouchers
are not redeemed and if there is not a legal obligation to remit the unredeemed voucher to the relevant jurisdiction,
an estimated redemption factor may be applied. We are in the process of evaluating historical data in order to
determine the portion of discount vouchers that will not be redeemed based on our customer redemption patterns.
However, we currently have not established sufficient history and the unredeemed coupons remain in deferred
revenue.
A reserve for sales returns and allowances is recorded based on historical experience or specific
identification of an event necessitating a reserve.
Advertising Expense
Advertising costs are expensed as incurred and included in marketing and selling expense. Advertising
expense for the years ended June 30, 2013, 2012 and 2011 was $285,530, $250,105 and $177,101, respectively,
which consisted of external costs related to customer acquisition and retention marketing campaigns.
Research and Development Expense
Research and development costs are expensed as incurred and included in technology and development
expense. Research and development expense for the years ended June 30, 2013, 2012 and 2011 was $24,690,
$19,707 and $11,128, respectively, which consisted of costs related to enhancing our manufacturing engineering
and technology capabilities.
Income Taxes
As part of the process of preparing our consolidated financial statements, we estimate our income taxes in
each of the jurisdictions in which we operate. This process involves estimating our current tax expense and
assessing temporary and permanent differences resulting from differing treatment of items for tax and financial
reporting purposes. We recognize deferred tax assets and liabilities for the temporary differences using the enacted
tax rates and laws that will be in effect when we expect temporary differences to reverse. We assess the ability to