Chegg 2014 Annual Report Download - page 102

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Table of Contents
64
Principles of Consolidation
The consolidated financial statements include the accounts of Chegg and our wholly owned subsidiaries. All
significant intercompany accounts and transactions have been eliminated in consolidation. The consolidated financial
statements have been prepared in accordance with U.S. GAAP.
Cash and Cash Equivalents and Restricted Cash
We consider all highly liquid investments with an original maturity date of three months or less from the date of
purchase to be cash equivalents. Cash and cash equivalents, which consist of cash and money market accounts at financial
institutions, are stated at cost, which approximates fair value.
We classify certain restricted cash balances within other current assets and other assets on the accompanying
consolidated balance sheets based upon the term of the remaining restrictions.
At December 31, 2014 and 2013, we had approximately $1.8 million and $1.7 million, respectively, of restricted cash
that consisted in part of escrow funds held in conjunction with our acquisitions prior to 2013, a deposit pledged as security for
our corporate credit cards and a letter of credit pledged as a security deposit for our headquarters, a sales office and warehouse
facilities leases. The certificate of deposit and escrow funds of approximately $0.3 million and $0.4 million as of December 31,
2014 and 2013, respectively, are classified in other current assets in our consolidated balance sheets due to the short-term
nature of the restriction. The amount related to the security deposit of approximately $1.5 million and $1.3 million as of
December 31, 2014 and 2013, respectively, is classified in other assets in our consolidated balance sheets as these amounts are
restricted for periods that exceed one year from the balance sheet dates.
Investments
We hold investments in marketable securities, consisting of corporate securities and commercial paper. We classify our
marketable securities as available-for-sale investments that are either short or long-term based on the nature of each security
based on the contractual maturity of the investment when purchased. Our available-for-sale investments are carried at estimated
fair value with any unrealized gains and losses, net of taxes, included in accumulated other comprehensive loss in stockholders’
equity. Unrealized losses are charged against other income (expense), net when a decline in fair value is determined to be other-
than-temporary. We have not recorded any such impairment charge in the periods presented. We determine realized gains or
losses on sale of marketable securities on a specific identification method, and record such gains or losses as other income
(expense), net. For the years ended December 31, 2014 and 2013, the Company's gross realized gains and losses on short-term
investments were not significant.
Accounts Receivable
Accounts receivable are recorded at the invoiced amount and are non-interest bearing. We generally grant
uncollateralized credit terms to our customers, which include textbook wholesalers and marketing services customers, and
maintain an allowance for doubtful accounts to account for potentially uncollectible receivables.
Allowance for Doubtful Accounts
We assess the creditworthiness of our customers based on multiple sources of information, and analyze such factors as
our historical bad debt experience, industry and geographic concentrations of credit risk, economic trends, and customer
payment history. This assessment requires significant judgment. Because of this assessment, which covers the sale of our brand
advertising and enrollment marketing services, we maintain an allowance for doubtful accounts for estimated losses resulting
from the inability of certain customers to make all of their required payments. In making this estimate, we analyze historical
payment performance and current economic trends when evaluating the adequacy of the allowance for doubtful accounts.
Accounts receivable are written off as a decrease to the allowance for doubtful accounts when all collection efforts have been
exhausted and an account is deemed uncollectible.