Overstock.com 2007 Annual Report Download - page 100

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Overstock.com, Inc.
Notes to Consolidated Financial Statements (Continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
useful life of three years. The Company expenses costs incurred related to design or maintenance of internal-use software as incurred.
During the years ended December 31, 2006 and 2007, the Company capitalized $21.7 million and $2.0 million, respectively, of costs associated with
internal-use software and website development. Amortization of costs associated with internal-use software and website development was $14.4 million and
$13.5 million for those respective periods.
Leases
The Company accounts for its lease agreements pursuant to Statement of Financial Accounting Standards ("SFAS") No. 13, Accounting for Leases,
which categorizes leases at their inception as either operating or capital leases depending on certain defined criteria. On certain of its lease agreements, the
Company may receive rent holidays and other incentives. The Company recognizes lease costs on a straight-line basis without regard to deferred payment
terms, such as rent holidays that defer the commencement date of required payments. Additionally, incentives it receives are treated as a reduction of our costs
over the term of the agreement. Leasehold improvements are capitalized at cost and amortized over the lesser of their expected useful life or the life of the
lease, without assuming renewal features, if any, are exercised.
Asset Retirement Obligation
In accordance with the Financial Accounting Standards Board ("FASB") SFAS No. 143, Accounting for Asset Retirement Obligations, the Company
establishes assets and liabilities for the present value of estimated future costs to return certain of our leased facilities to their original condition. Such assets
are depreciated over the lease period into operating expense, and the recorded liabilities are accreted to the future value of the estimated restoration costs.
Other long-term assets
Other long-term assets include deposits, intangibles, deferred financing and issuance costs and the fees associated with the acquisition of Overstock.com
and other related domain names. The cost of the domain names is being amortized using the straight-line method over 5 years.
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 impairment of long-lived assets during 2005, 2006 and 2007.
F-11