Overstock.com 2004 Annual Report Download - page 73

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Leasehold improvements are amortized over the shorter of the term of the related leases or estimated service lives. Upon sale or retirement of assets, cost
and related accumulated depreciation are removed from the balance sheet and the resulting gain or loss is reflected in the consolidated statement of operations.
Other long-term assets
Other long-term assets include deposits and the cost of acquiring the Overstock.com and other related domain names. The cost of the domain names is
being amortized using the straight-line method over 5 years.
Goodwill
Goodwill represents the excess of the purchase price paid over the fair value of the tangible net assets acquired for the purchase of Gear.com.
In accordance with Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets, goodwill is not amortized but tested for
impairment at least annually. The Company evaluated the $2,784 of unamortized goodwill during 2002, 2003 and 2004, and determined that no impairment
charge should be recorded.
Impairment of long-lived assets
The Company reviews property and equipment and other long-lived assets for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Recoverability is measured by comparison of the assets' carrying amount to future undiscounted net cash
flows the assets are expected to generate. Cash flow forecasts are based on trends of historical performance and management's estimate of future performance,
giving consideration to existing and anticipated competitive and economic conditions. If such assets are considered to be impaired, the impairment to be
recognized is measured by the amount by which the carrying amount of the assets exceeds the projected discounted future cash flows arising from the assets
or their fair values, whichever is more determinable. The Company did not record any impairments during 2002, 2003 and 2004.
Revenue recognition
The Company derives its revenue primarily from two sources: direct revenue and fulfillment partner revenue, including listing fees and commissions
collected from products being listed and sold through the Auctions tab of its Website. Both direct revenue and fulfillment partner revenue are recorded net of
returns, coupons redeemed by customers, and other discounts. Revenue is recognized when the following revenue recognition criteria are met: (1) persuasive
evidence of an arrangement exists; (2) the product has been shipped and the customer takes ownership and assumes the risk of loss or the service has been
provided; (3) the selling price or fee revenue earned is fixed or determinable; and (4) collection of the resulting receivable is reasonably assured. The
Company generally requires payment by credit card at the point of sale. Amounts received prior to shipment of products or service is recorded as deferred
revenue. In addition, amounts received in advance for Club O and Club O Gold membership fees are recorded as deferred revenue and recognized ratably
over the membership
F-10