Overstock.com 2004 Annual Report Download - page 72

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Accounts receivable
Accounts receivable consist of trade amounts due from customers and from credit cards billed but not yet received at period end. Accounts receivable are
recorded at invoiced amounts and do not bear interest. The Company evaluates its allowance for doubtful accounts monthly. Account balances are written-off
against the allowance when it is probable that the receivable will not be recovered. The Company recorded an allowance for doubtful accounts of $650 and
$750 at December 31, 2003 and 2004, respectively.
Concentration of credit risk
Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash equivalents, investment
securities, and receivables. The Company invests its cash primarily in money market, government and corporate securities which are uninsured.
The Company's accounts receivable are derived primarily from revenue earned from customers located in the United States. The Company maintains an
allowance for doubtful accounts based upon the expected collectibility of accounts receivable.
Prepaid inventory
Prepaid inventory represents inventory paid for in advance of receipt. Prepaid inventory at December 31, 2003 and 2004 was $2,946 and $12,322,
respectively.
Prepaid expenses
Prepaid expenses represent expenses paid for prior to receipt of the related goods or services, including advertising, maintenance, packaging, insurance
and other miscellaneous costs. Total prepaid expenses at December 31, 2003 and 2004 were $1,637 and $3,444, respectively.
Inventories
Inventories consist of merchandise purchased for resale and are stated at the lower of average cost or market. The Company establishes reserves for
estimated obsolescence or damage equal to the difference between the cost of inventory and the estimated market value based upon assumptions about future
demand and market conditions.
Property and equipment
Property and equipment, which includes capitalized leases, are recorded at cost and depreciated using the straight-line method over the estimated useful
lives of the related assets or the term of the related lease, whichever is shorter, as follows:
Years
Computer software 3
Computer hardware 3-5
Furniture and equipment 3-5
F-9