Chegg 2015 Annual Report Download - page 105

Table of Contents
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loss from the liquidation of print textbooks previously rented is recorded as a component of operating expenses in our
consolidated statement of operations and is classified as cash flow from operating activities.
All print textbooks in our textbook library are stated at cost, which includes the purchase price less accumulated
depreciation. We record allowances for lost or damaged print textbooks in cost of revenues in our consolidated statements of
operations based on our assessment of our print textbook library on a book-by-book basis. Write-offs result from lost or
damaged books, books no longer considered to be rentable, or when books are not returned to us after the rental period by our
We depreciate our print textbooks, less an estimated salvage value, over an estimated useful life of three years using an
accelerated method of depreciation, as we estimate this method most accurately reflects the actual pattern of decline in the
economic value of the assets. The salvage value considers the historical trend and projected liquidation proceeds for print
textbooks. The useful life is determined based on the time period in which the print textbooks are held and rented before
liquidation. In accordance with our policy, we review the estimated useful lives of our print textbook library on an
Depreciation expense and write-offs of print textbooks are recorded in cost of revenues in our consolidated statements of
operations. During 2015, 2014 and 2013, print textbook depreciation expense was approximately $43.6 million, $70.1
million and $64.8 million, respectively, and write-offs were approximately $5.3 million, $10.5 million and $5.9 million,
respectively.
Property and
Property and equipment are recorded at cost less accumulated depreciation and amortization. Depreciation and
amortization are computed using the straight-line method over the following estimated useful lives of the assets:
Classification Useful Life
Computers and equipment. . . . . . . . . . . . . . . . . . 3 years
Software. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 years
Furniture and fixtures . . . . . . . . . . . . . . . . . . . . . 5 years
Leasehold improvements. . . . . . . . . . . . . . . . . . . Shorter of the remaining lease term or the estimated useful life of 5 years
Content . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 years
We capitalize costs related to the purchase or development of Chegg Study and Test Prep content and amortize these
costs over a period of five years.
Depreciation and amortization expense are generally classified within the corresponding cost of revenues and operating
expenses categories in our consolidated statement of operations. Depreciation and amortization expense
for 2015, 2014 and 2013 were approximately $6.8 million, $6.2 million and $5.7 million, respectively
The cost of maintenance and repairs is expensed as incurred. When assets are retired or otherwise disposed of, the cost
and related accumulated depreciation and amortization are removed from their respective accounts, and any gain or loss on such
sale or disposal is reflected in loss from operations.
Software Development Costs
We capitalize costs related to software developed or obtained for internal use when certain criteria have been met. Costs
incurred during the application development stage for internal-use software are capitalized in property and equipment and
amortized over the estimated useful life of the software, generally up to three
We had no capitalized software development costs as of December 31, 2015. As of December 31, 2014, software
development costs, net, were approximately $0.5 million which were recorded as software in property and equipment.
In 2015, 2014 and 2013, the amortization of software development costs capitalized totaled approximately $0.5 million, $0.5
million and $1.0 million, respectively.