Overstock.com 2009 Annual Report Download - page 59

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Table of Contents
selling price or fee revenue earned is fixed or determinable; and (4) collection of the resulting receivable is reasonably assured.
Revenue related to merchandise sales is recognized upon delivery to our customers. As we ship high volumes of packages through multiple carriers, it is
not practical for us to track the actual delivery date of each shipment. Therefore, we use estimates to determine which shipments are delivered and, therefore,
recognized as revenue at the end of the period. Our delivery date estimates are based on average shipping transit times, which are calculated using the
following factors: (i) the shipping carrier (as carriers differ in transit times); (ii) the fulfillment source (either our warehouses or those of our fulfillment
partners); (iii) the delivery destination; and (iv) actual transit time experience, which shows that delivery date is typically one to eight business days from the
date of shipment.
We review and update our estimates on a quarterly basis based on our actual transit time experience. However, actual shipping times may differ from our
estimates. The following table shows the effect that hypothetical changes in the estimate of average shipping transit times would have had on the reported
amount of revenue and net income for the year ended December 31, 2009 (in thousands):
Year ended December 31, 2009
Change in the
Estimate of Average
Transit Times (Days) Increase (Decrease) Revenue Increase (Decrease) Net Income
-2 $ 4,659 $ 683
-1 $ 2,702 $ 395
As reported As reported As reported
1 $(3,824) $(585)
2 $(4,645) $(705)
When we are the primary obligor in a transaction, are subject to inventory risk, have latitude in establishing prices and selecting suppliers, or have
several but not all of these indicators, revenue is recorded gross. If we are not the primary obligor in the transaction and amounts earned are determined using
a fixed percentage, revenue is recorded on a net basis. Currently, the majority of both direct revenue and fulfillment partner revenue is recorded on a gross
basis, as we are the primary obligor. In our statements of operations, we present revenue net of sales taxes.
We periodically provide incentive offers to our customers to encourage purchases. Such offers include discount offers, such as percentage discounts off
current purchases and other similar offers, which, when used by our customers, are treated as a reduction of revenue.
Direct revenue
Direct revenue is derived from merchandise sales to individual consumers and businesses that are fulfilled from our leased warehouses. Direct revenue
comes from sales that occur primarily through our Website, but may also occur through offline channels.
Fulfillment partner revenue
Fulfillment partner revenue is derived from merchandise sales through our Website which fulfillment partners ship directly to our customers from
warehouses maintained by our fulfillment partners.
We provide an online auction service on our Website. The Auctions business allows sellers to list items for sale, buyers to bid on items of interest, and
users to browse through listed items online. Except in limited circumstances where we auction-list returned merchandise, we are not the seller of auction-
listed items and have no control over the pricing of those items. Therefore, the listing fees for items sold at auction by sellers are recorded as revenue during
the period items are listed or sold on a
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