eTrade 1999 Annual Report Download - page 48

development of the Company's systems, as well as payroll and consulting costs. Capitalized costs were $4,850,000, $10,210,000 and
$2,832,000 for the years ended September 30, 1999, 1998 and 1997, respectively.
Completed projects are transferred to property and equipment at cost and are amortized on a straight-line basis over their estimated
useful lives, generally two to three years. Amortization expense for the years ended September 30, 1999, 1998 and 1997 was
$7,094,000, $1,715,000 and $69,000, respectively.
Impairment of Long-Lived Assets--In the event that facts and circumstances indicate that the carrying value of a long-lived asset,
including associated intangibles, may be impaired, an evaluation of recoverability is performed by comparing the estimated future
undiscounted cash flows associated with the asset to the asset's carrying amount to determine if a write-down to market value or
discounted cash flow is required. No such write-down was made for the years ended September 30, 1999, 1998 or 1997.
Cash Equivalents--For purposes of reporting cash flows, the Company considers all highly liquid investments with original maturities
of three months or less (except for amounts required to be segregated under Federal or other regulations or investment securities
designated as available-for-sale) to be cash equivalents.
Cash and Investments Required to be Segregated Under Federal or Other Regulations--Cash and investments required to be segregated
under Federal or other regulations consist primarily of government backed securities purchased under agreements to resell ("Resale
Agreements"). Resale Agreements are accounted for as collateralized financing transactions and are recorded at their contractual
amounts, which approximate fair value.
Investments--Investment securities represent a portfolio of commercial paper, municipal bonds, corporate bonds, U.S. Government
obligations and money market funds. The cost of these investments approximates fair market value, and management has designated
them as available-for-sale. Unrealized gains and losses, net of tax, are computed on the basis of average cost and are included in
shareowners' equity. Realized gains and losses and declines in fair value judged to be other than temporary, are included in
non-operating income (expense). The cost of securities sold is based on the average cost method and interest earned is included in
interest revenue.
Investments in entities of which the Company owns between 20% and 50% or has the ability to exercise significant influence are
accounted for under the equity method. Other equity investments are accounted for using the cost method.
Estimated Fair Value of Financial Instruments--The Company believes the amounts presented for financial instruments on the
consolidated balance sheets consisting of cash equivalents, commercial paper, municipal bonds, corporate bonds, U.S. Government
obligations, money market funds, and brokerage receivables and payables to be reasonable estimates of fair value. The Company uses
available market information as of the balance sheet dates and appropriate valuation methodologies in deriving amounts reported for
financial instruments.
Stock-Based Compensation--The Company accounts for employee stock-based compensation using the intrinsic value method of
accounting prescribed in Accounting Principles Board ("APB") Opinion No. 25, Accounting for Stock Issued to Employees. The
Company provides pro forma disclosures of net income
(loss) and income (loss) per share as required under SFAS No. 123, Accounting for Stock-Based Compensation. SFAS No. 123
encourages, but does not require companies to recognize compensation expense for grants of stock, stock options, and other equity
instruments based on the fair value method of accounting.
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Advertising Costs--Advertising production costs are expensed when the initial advertisement is run. Costs of communicating
advertising are expensed as the services are received.
Income Taxes--The Company accounts for income taxes in accordance with SFAS No. 109, Accounting for Income Taxes, which
requires the recognition of deferred tax assets and liabilities at tax rates expected to be in effect when these balances reverse. Future
tax benefits attributable to temporary differences are recognized to the extent that realization of such benefits is more likely than not.
Earnings Per Share--Basic earnings per share ("EPS") is computed by dividing net income by the weighted average common shares
outstanding for the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common
stock were exercised or converted into common stock.
Comprehensive Income--On October 1, 1998, the Company adopted SFAS No. 130, Reporting Comprehensive Income, which
requires that an enterprise report, by major components and as a single total, the change in net assets during the period from non-owner
sources. Such information is included in the Statements of Shareowners' Equity.
2002. EDGAR Online, Inc.