Enom 2010 Annual Report Download - page 104

Table of Contents
Demand Media, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(In thousands, except per share amounts)
2. Summary of Significant Accounting Policies (Continued)
acquired businesses being recorded at their estimated fair values on the acquisition dates. All significant intercompany transactions and balances have been
eliminated in consolidation.
Investments in affiliates over which the Company has the ability to exert significant influence, but does not control and is not the primary beneficiary of,
including NameJet, LLC ("NameJet"), are accounted for using the equity method of accounting. Investments in affiliates which the Company has no ability to
exert significant influence are accounted for using the cost method of accounting. The Company's proportional shares of affiliate earnings or losses accounted
for under the equity method of accounting, which are not material for all periods presented, are included in other income (expense) in the Company's
consolidated statements of operations. Affiliated companies are not material individually or in the aggregate to the Company's financial position, results of
operations or cash flows for any period presented.
Use of Estimates
The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and
liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Significant items subject to
such estimates and assumptions include revenue, allowance for doubtful accounts, fair value of marketable securities, fair value of the revolving line of credit,
investments in equity interests, fair value of issued and acquired stock warrants, the assigned value of acquired assets and assumed liabilities in business
combinations, useful lives and impairment of property and equipment, intangible assets and goodwill, the fair value of the Company's equity-based
compensation awards, and deferred income tax assets and liabilities. Actual results could differ materially from those estimates. On an ongoing basis, the
Company evaluates its estimates compared to historical experience and trends, which form the basis for making judgments about the carrying value of assets
and liabilities.
Cash and Cash Equivalents
The Company considers all highly liquid investments with a maturity of 90 days or less at the time of purchase to be cash equivalents. The Company
considers funds transferred from its credit card service providers but not yet deposited into its bank accounts at the balance sheet dates, as funds in transit and
these amounts are recorded as unrestricted cash, since the amounts are generally settled the day after the outstanding date. Cash and cash equivalents consist
primarily of checking accounts, money market accounts, money market funds, and short-term certificates of deposit.
Restricted Cash
As of December 31, 2010 and 2009, restricted cash consists of amounts held on deposit with certain credit card service and Internet payment providers,
including amounts to provide security for credit card chargebacks. The amounts held on deposit with credit card providers, which are withheld monthly,
represent a small percentage of the credit card and Internet payments processed and are remitted to the Company on a rolling basis every 90 days. The
Company classifies restricted cash held on deposit with credit card service providers as a noncurrent asset since the credit card reserves, when
F-8