Overstock.com 2009 Annual Report Download - page 107

Table of Contents
Overstock.com, Inc.
Notes to Consolidated Financial Statements (Continued)
2. ACCOUNTING POLICIES (Continued)
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, tenant improvement allowances are amortized as a reduction in rent expense over the term of the
lease. 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.
Treasury stock
The Company accounts for treasury stock under the cost method and includes treasury stock as a component of stockholders' equity (deficit).
Other long-term assets
Other long-term assets include long-term prepaid expenses and deposits.
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 their fair values. The Company did not record any impairment of
long-lived assets during 2007, 2008 and 2009.
Goodwill
Goodwill represents the excess of the purchase price paid over the fair value of the tangible net assets acquired in business combinations.
Goodwill is not amortized but tested for impairment at least annually. When evaluating whether goodwill is impaired, the Company compares the fair
value of the reporting unit to which the goodwill is assigned to its carrying amount. If the carrying amount exceeds its fair value, then the amount of the
impairment loss must be measured. The impairment loss, if any, is calculated by comparing the implied fair value of the goodwill to its carrying amount. In
calculating the implied fair value of goodwill, the fair value of the reporting unit is allocated to the other assets and liabilities within the reporting unit based
on fair value. The excess of the fair value of a reporting unit over the amount allocated to its other assets and liabilities is the implied fair value of goodwill.
An impairment loss is recognized when the carrying amount of goodwill exceeds its implied fair value.
In conjunction with the discontinuance of the Company's travel subsidiary ("OTravel"), the Company performed an evaluation of the goodwill associated
with the reporting unit and determined that goodwill of approximately $3.8 million was impaired in 2007 (see "Note 5—Acquisition and Subsequent
Discontinued Operations"). The Company evaluated its goodwill as of December 31, 2008 and 2009 and determined that no impairment charge should be
recorded.
F-13