Overstock.com 2009 Annual Report Download - page 4

Table of Contents
EXPLANATORY NOTE
On January 29, 2010, the Audit Committee of the Board of Directors of Overstock.com, Inc. concluded, based on the recommendation of management,
that we would restate (1) our consolidated financial statements for the year ended December 31, 2008 and (2) our quarterly consolidated financial statements
for all interim periods for the year ended December 31, 2008 and the interim periods ended March 31, 2009, June 30, 2009 and September 30, 2009 within
this Form 10-K to correct the following errors:
Accounting for amounts that we pay our drop ship fulfillment partners and an amount due from a vendor that went undiscovered for a period of
time. Specifically, these errors related to (1) amounts we paid to partners or deducted from partner payments related to return processing services
and product costs and (2) amounts we paid to a freight vendor based on incorrect invoices from the vendor. Once discovered, we applied "gain
contingency" accounting for the recovery of such amounts, which was an inappropriate accounting treatment.
Amortization of the expense related to restricted stock units. Previously the expense was based on the actual three year vesting schedule, which
incorrectly understated the expense as compared to a three year straight line amortization. We also corrected for the use of an outdated forfeiture
rate in calculating share-based compensation expense under the plans.
The following additional adjustments were also included in this restatement:
Correction of certain amounts related to customer refunds and credits.
Recognition of co-branded credit card bounty revenue and promotion expense over the estimated term of the credit card relationships. Previously
the revenue was incorrectly recognized when the card was issued.
Reduction in the restructuring accrual and correction of the related expense due to a 2008 sublease benefit which was previously excluded from
the accrual calculation and the accretion of interest expense related to the restructuring accrual, which was not previously recorded.
Change in our accounting for external audit fees to the "as incurred" method instead of the "ratable" method.
Other miscellaneous adjustments, none of which were material either individually or in the aggregate. Certain of these adjustments were related
to a reduction in revenue and cost of goods sold in equal amounts for certain consideration we received from vendors, an increase in inventory,
accounts payable and accrued liabilities to record our sales return allowance on a gross basis, an adjustment to our cash and restricted cash
balances due to compensating balance arrangements and an adjustment to record redeemable common stock for certain shares previously issued
to employees.
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