Juno 2013 Annual Report Download - page 47

Table of Contents
The member redemption liability is estimated based upon the weighted-average cost and number of points that may be redeemed in the future. The
weighted-average cost of points is calculated by taking the total cost of items fulfilled divided by total points redeemed. MyPoints purchases gift cards
and other awards from merchants at a discount and sets redemption levels for its members. The discounts and points needed to redeem awards vary by
merchant and award denomination. MyPoints has the ability to adjust the number of points required to redeem awards to reflect changes in the cost of
awards.
MyPoints accounts for and reduces the gross points issued by an estimate of points that will never be redeemed by its members. This reduction is
calculated based on an analysis of historical point-earning trends, redemption activities and individual member account activity. MyPoints' historical
analysis takes into consideration the total points in members' accounts that have been inactive for six months or longer, less an estimated reactivation
rate, plus an estimate for future cancelations of points that have not yet been outstanding for 180 days. Changes in, among other factors, the net number
of points issued, redemption activities and members' activity levels could materially impact the member redemption liability. A 100 basis point increase
or decrease in the estimate of points that will never be redeemed would increase or decrease our member redemption liability at December 31, 2013 by
approximately $33,000.
Points in active MyPoints accounts do not expire; however, unredeemed points expire after twelve consecutive months of inactivity. For purposes
of the member redemption liability, "inactive" means a lack of all of the following: email response; survey completion; profile update; and any point-
earning or point-redeeming transaction. The canceling or disabling of inactive MyPoints accounts would have no impact on our consolidated financial
statements, as we fully consider inactive MyPoints accounts when establishing the member redemption liability, as discussed above.
The following table sets forth, for the periods presented, a reconciliation of the changes in the member redemption liability (in thousands):
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We apply the provisions of ASC 740, . Under ASC 740, deferred tax assets and liabilities are determined based on differences
between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when
the differences are expected to reverse. We record a valuation allowance to reduce our deferred tax assets to the amount that is more likely than not to be
realized. In evaluating our ability to recover our deferred tax assets, we consider all available positive and negative evidence, including our operating
results, ongoing tax planning and forecasts of future taxable income on a jurisdiction-by-jurisdiction basis. In accordance with ASC 740, we recognize,
in our consolidated financial statements, the impact of our tax positions that are more likely than not to be sustained upon examination based on the
technical merits of the positions. The Company recognizes interest and penalties for uncertain tax positions in income tax expense.
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    
Beginning balance $ 22,575 $ 23,457
Accruals for points earned 11,892 14,077
Reduction for redeemed points (13,586) (15,155)
Changes in allowance for points expected to expire and weighted-average
cost of points 46 196
Ending balance $ 20,927 $ 22,575