Earthlink 2011 Annual Report Download - page 87

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Table of Contents
EARTHLINK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
goodwill. Upon the conclusion of the measurement period, any subsequent adjustments are recorded to the Company's Consolidated Statements
of Operations.
Cash and Cash Equivalents
Cash and cash equivalents consist of cash and highly liquid investments with original maturities of three months or less at the date of
acquisition. Cash equivalents are stated at amortized cost, which approximates fair value.
Restricted Cash
The Company classifies any cash or investments that collateralize outstanding letters of credit or certain operating or performance
obligations of the Company as restricted cash. Restricted cash is classified as current in the Consolidated Balance Sheets according to the
duration of the restriction and the purpose for which the restriction exists.
Marketable Securities
Marketable securities consist of investments with original maturities greater than three months at the date of acquisition. Marketable
securities with maturities less than one year from the balance sheet date are classified as short-
term marketable securities. Marketable securities
with maturities greater than one year from the balance sheet date are classified as long-term marketable securities. Available-for-
sale securities
are carried at fair value, with any unrealized gains and losses, net of tax, included in accumulated other comprehensive income as a separate
component of stockholders' equity and in total comprehensive income. Amounts reclassified out of accumulated other comprehensive income
into earnings are determined on a specific identification basis. Realized gains and losses on marketable securities are included in interest expense
and other, net, in the Consolidated Statements of Operations and are determined on a specific identification basis.
Allowance for Doubtful Accounts
The Company maintains an
allowance for doubtful accounts for accounts receivable amounts that may not be collectible. In assessing the
adequacy of the allowance for doubtful accounts, management considers a number of factors, including the aging of the accounts receivable
balances, historical collection experience, a specific customer's ability to meet its financial obligations to the Company and the general economic
environment. If the financial condition of EarthLink's customers were to deteriorate, resulting in an impairment of their ability to make
payments, additional allowances may be required. Allowances for doubtful accounts are recorded as a selling, general and administrative
expense in the Consolidated Statements of Operations.
The Company's allowance for doubtful accounts was $1.2 million and $7.3 million as of December 31, 2010 and 2011, respectively. The
Company recorded bad debt expense of $6.2 million, $3.6 million and $9.9 million during the years ended December 31, 2009, 2010 and 2011,
respectively. The Company's write-
offs of uncollectible accounts were $8.5 million, $4.1 million and $3.8 million during the years ended
December 31, 2009, 2010 and 2011, respectively.
Inventories
Inventories consist of finished goods and are stated at the lower of cost or market value, using the first-in, first-
out method. Inventories are
included in other current assets in the Consolidated Balance Sheets.
80