Enom 2011 Annual Report Download - page 91

media services and online value added services. Deferred revenue is recognized as revenue on a systematic basis that is proportionate to the unexpired term of
the related domain name registration, media subscription as services are rendered, over customer useful life, or online value added service period.
Deferred registration costs represent incremental direct costs made to registries, ICANN, and other third parties for domain name registrations and
are recorded as a deferred cost on the balance sheets. Deferred registration costs are amortized to expense on a straight-line basis concurrently with the
recognition of the related domain name registration revenue and are included in service costs.
Property and equipment
Property and equipment are stated at cost less accumulated depreciation. Depreciation is computed using the straight-line method over the
estimated useful lives of the assets. Computer equipment is amortized over two to five years, software is amortized over two to three years, and furniture and
fixtures are amortized over seven to ten years. Leasehold improvements are amortized straight-line over the shorter of the remaining lease term or the
estimated useful lives of the improvements ranging from one to ten years. Upon the sale or retirement of property or equipment, the cost and related
accumulated depreciation or amortization is removed from the Company’s financial statements with the resulting gain or loss reflected in the Company’s
results of operations. Repairs and maintenance costs are expensed as incurred. In the event that property and equipment is no longer in use, the Company will
record a loss on disposal of the property and equipment, which is computed as difference between the sales price, if any, and the net remaining value (gross
amount of property and equipment less accumulated depreciation expense) of the related equipment at the date of disposal.
Intangibles—Undeveloped Websites
The Company capitalizes costs incurred to acquire and to initially register its owned and operated undeveloped websites (i.e. Uniform Resource
Locators). The Company amortizes these costs over the expected useful life of the underlying undeveloped websites on a straight-line basis. The expected
useful lives of the website names range from 12 months to 84 months. The Company determines the appropriate useful life by performing an analysis of
expected cash flows based on historical experience with domain names of similar quality and value.
In order to maintain the rights to each undeveloped website acquired, the Company pays periodic renewal registration fees, which generally cover a
minimum period of twelve months. The Company records renewal registration fees of website name intangible assets in deferred registration costs and
amortizes the costs over the renewal registration period, which is included in service costs.
Intangibles—Media Content
The Company capitalizes the direct costs incurred to acquire its media content that is determined to embody a probable future economic benefit.
Costs are recognized as finite lived intangible assets based on their acquisition cost to the Company. Direct content costs primarily represent amounts paid to
unrelated third parties for completed content units, and to a lesser extent, specifically identifiable internal direct labor costs incurred to enhance the value of
specific content units acquired prior to their publication. Internal costs not directly attributable to the enhancement of an individual content unit acquired are
expensed as incurred. All costs incurred to deploy and publish content are expensed as incurred, including the costs incurred for the ongoing maintenance of
the Company’s websites in which the Company’s content is deployed.
Capitalized media content is amortized on a straight-line basis over five years, representing the Company’s estimate of the pattern that the
underlying economic benefits are expected to be realized and based on its estimates of the projected cash flows from advertising revenue expected to be
generated by the deployment of its content. These estimates are based on the Company’s plans and projections, comparison of the economic returns generated
by its content of comparable quality and an analysis of historical cash flows generated by that content to date. Amortization of media content is included in
amortization of intangible assets in the accompanying statement of operations and the acquisition costs are included in purchases of intangible assets within
cash flows from investing activities in the Consolidated Statements of Cash Flows.
Intangibles—Acquired in Business Combinations
The Company performs valuations of assets acquired and liabilities assumed on each acquisition accounted for as a business combination and
allocates the purchase price of each acquired business to its respective net tangible and intangible assets. Acquired intangible assets include: trade names, non-
compete agreements, owned website names, customer relationships, technology, media content, and content publisher relationships. The Company determines
the appropriate useful
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