Enom 2012 Annual Report Download - page 92

F-9
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, 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, goodwill and other assets, 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.
Investments in Marketable Securities
Investments in marketable securities are classified as available for sale and are recorded at fair value, with the
unrealized gains and losses if any, net of taxes, reported as a component of shareholders' equity until realized or until a
determination is made that an other-than-temporary decline in market value has occurred.
When the Company does not intend to sell a debt security, and it is more likely than not that the Company will not
have to sell the security before recovery of its cost basis, it recognizes the credit component of an other-than-temporary
impairment of a debt security in earnings and the remaining portion in other comprehensive income. The credit loss component
recognized in earnings is identified as the amount of principal cash flows not expected to be received over the remaining term
of the security as projected based on cash flow projections. The Company did not have any securities with other-than-
temporary impairment at December 31, 2011 and 2012.
In determining whether other-than-temporary impairment exists for equity securities, management considers: (1) the
length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects
of the issuer and (3) the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to
allow for any anticipated recovery in fair value. The Company has determined that there has been no impairment of its equity
marketable securities to date.
The cost of marketable securities sold is based upon the specific identification method and any realized gains or losses
on the sale of investments are reflected as a component of interest income or expense. The unrealized gains or losses on short-
term marketable securities were not significant for the years ended December 31, 2010, 2011 and 2012.
In addition, the Company classifies marketable securities as current or non-current based upon whether such assets are
reasonably expected to be realized in cash or sold or consumed during the normal operating cycle of the business.
Revenue Recognition
The Company recognizes revenue when four basic criteria are met: persuasive evidence of a sales arrangement exists;
performance of services has occurred; the sales price is fixed or determinable; and collectability is reasonably assured. The
Company considers persuasive evidence of a sales arrangement to be the receipt of a signed contract or insertion order.
Collectability is assessed based on a number of factors, including transaction history with the customer and the credit
worthiness of the customer. If it is determined that the collection is not reasonably assured, revenue is not recognized until
collection becomes reasonably assured, which is generally upon receipt of cash. The Company records cash received in
advance of revenue recognition as deferred revenue.
For arrangements with multiple deliverables, the Company allocates revenue to each deliverable if the delivered item
(s) has value to the customer on a standalone basis and, if the arrangement includes a general right of return relative to the
delivered item, delivery or performance of the undelivered item(s) is considered probable and substantially in the control of the
Company. The fair value of the selling price for a deliverable is determined using a hierarchy of (1) Company specific