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collected in advance and recognize them in the period earned. Additionally, we defer and recognize subscriber activation fees and
related direct incremental costs over a subscriber’s estimated useful life.
Our advertising revenues (included in “other revenues”) primarily consist of revenues derived by delivering email messages to
our customers on behalf of advertisers. Revenues are recognized in the period in which the advertising services are performed,
provided that no significant j2 Global obligations remain and the collection of the resulting receivable is reasonably assured.
Our patent revenues (included in “other revenues”) consist of revenues generated under license agreements that provide for the
payment of contractually determined fully paid-up or royalty-bearing license fees to us in exchange for the grant of a non-exclusive,
retroactive and future license to our patented technology. Patent revenues are recognized when earned over the term of the license
agreement. With regard to fully-paid up license arrangements, we generally recognize as revenue in the period the agreement is
executed the portion of the payment attributable to past use of the patented technology and amortize the remaining portion of such
payments on a straight line basis over the life of the licensed patent(s). With regard to royalty-bearing license arrangements, we
recognize revenue of license fees earned during the applicable period.
(f) Fair Value of Financial Instruments
In September 2006, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 157, Fair Value Measurements
(“SFAS 157”), which defines fair value, provides a framework for measuring fair value and expands the disclosures required for fair
value measurements. SFAS 157 applies to all accounting pronouncements that require fair value measurements; it does not require any
new fair value measurements. Effective for fiscal years beginning after November 15, 2007, companies were required to implement
SFAS 157 for certain assets and liabilities that are carried at fair value on a recurring basis in financial statements. The FASB did,
however, provide a one-year deferral for the implementation of Statement 157 for certain nonfinancial assets and liabilities. We do not
expect the implementation of this deferral to have a material impact on our consolidated financial position and results of operations.
Accordingly, we adopted SFAS 157 for financial assets and liabilities commencing on January 1, 2008.
As of December 31, 2008 and 2007, the carrying value of cash and cash equivalents, short-term investments, accounts
receivable, interest receivable, accounts payable, accrued expenses, interest payable and customer deposits approximates fair value
due to the short-term nature of such instruments. The carrying value of other long-term liabilities approximates fair value as the
related interest rates approximate rates currently available to j2 Global.
In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Liabilities - Including an
Amendment of FASB Statement No. 115 (“SFAS 159”). SFAS 159 permits entities to choose to measure certain financial assets and
liabilities at fair value. Effective for fiscal years beginning after November 15, 2007. SFAS 159 requires an entity to report unrealized
gains and losses on eligible items for which the entity has elected to use the fair value option in earnings at each subsequent reporting
date. As permitted by SFAS 159, we have elected not to use the fair value option to measure our available-for-sale and held-to-
maturity securities under SFAS 159 and will continue to report under SFAS No. 115, Accounting for Certain Investments in Debt and
Equity Securities (“SFAS 115”). We have made this election because the nature of our financial assets and liabilities are not of such
complexity that they would benefit from a change in valuation to fair value.
(g) Cash and Cash Equivalents
We consider cash equivalents to be only those investments that are highly liquid, readily convertible to cash and with maturities
of 90 days or less at the purchase date.
(h) Investments
We account for our short-term and long-term investments in debt securities in accordance with SFAS No. 115, Accounting for
Certain Investments in Debt and Equity Securities, and FASB Staff Position Nos. FAS 115-1 and FAS 124-1 (“FAS 115-1 and FAS
124-1”), The Meaning of Other-Than-Temporary Impairment and its Application to Certain Investments. These j2 Global investments
are typically comprised primarily of readily marketable corporate debt securities, debt instruments of the U.S. government and its
agencies and auction rate debt and preferred securities. We determine the appropriate classification of our investments at the time of
acquisition and reevaluate such determination at each balance sheet date. Held-to-maturity securities are those investments in which
we have the ability and intent to hold until maturity. Held-to-maturity securities are recorded at amortized cost. Available-for-sale
securities are recorded at fair value, with unrealized gains or losses recorded as a separate component of accumulated other
comprehensive income (loss) in shareholders’ equity until realized. Trading securities are carried at fair value, with unrealized gains
and losses included in investment income. All securities are accounted for on a specific identification basis.