eFax 2010 Annual Report Download - page 27

Critical Accounting Policies and Estimates
In the ordinary course of business, we make a number of estimates and assumptions relating to the reporting of results of operations and
financial condition in the preparation of our financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”
).
Actual results could differ significantly from those estimates under different assumptions and conditions. We believe that the following
discussion addresses our most critical accounting policies, which are those that are most important to the portrayal of our financial condition and
results and require management’
s most difficult, subjective and complex judgments, often as a result of the need to make estimates about the
effect of matters that are inherently uncertain.
Revenues . Our revenues consist substantially of monthly recurring and usage-
based fees. In accordance with GAAP, we defer the
portions of monthly recurring subscription and usage-
based fees 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.
Investments. We account for our investments in debt securities in accordance with FASB ASC Topic No. 320, Investments –
Debt and
Equity Securities (“ASC 320”).
ASC 320 requires that certain debt and equity securities be classified into one of three categories: trading,
available-for-sale or held-to-
maturity securities. These investments are typically comprised primarily of readily marketable corporate debt
securities, auction rate debt, preferred securities and certificates of deposits. 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 that 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
stockholders’ equity until realized. Trading securities are
Year Ended December 31,
2010
2009
2008
Subscriber revenues:
Fixed
$
205,475
$
197,918
$
186,459
Variable
47,016
44,004
50,382
Total subscriber revenues
$
252,491
$
241,922
$
236,841
Percentage of total subscriber revenues:
Fixed
81.4%
81.8%
78.7%
Variable
18.6%
18.2%
21.3%
Revenues:
DID
-
based
$
242,025
$
233,443
$
228,984
Non
-DID-based
13,369
12,128
12,529
Total revenues
$
255,394
$
245,571
$
241,513
Average monthly revenue per paying DID
(1)
$
12.44
(2)
$
15.09
$
15.96
(1) See calculation of average revenue per paying DID at the end of this section, Item 7, Management’
s Discussion and Analysis of
Financial Condition and Results of Operations. The decline in average revenue per paying DID is the result of continued growth in our
lower priced fax brands and our corporate fax segment. In addition, our standard convention of calculating average revenue per paying
DID, which applies the average of the periods beginning and ending base to the total revenue of the period, may be impacted by the
timing of acquisitions during the period.
(2)
Due to our standard convention of calculating average revenue per paying DID, although we acquired Protus in the month of December
2010 the calculation assumes that the DIDs were outstanding for one-
half of the year. However, the related revenues associated with
those DIDs is only included in our results since the acquisition date. If we used a monthly weighted average convention to calculate
average revenue per paying DID, the average revenue per paying DID would be $14.43.
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