Overstock.com 2009 Annual Report Download - page 84

Table of Contents
(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 We also corrected for the use of an outdated forfeiture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.
(b) Disclosure Controls and Procedures
We maintain disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934 (the
"Exchange Act"), that are designed to ensure that information required to be disclosed in the reports filed or submitted under the Exchange Act, is recorded,
processed, summarized, and reported within the time periods specified by the Commission's rules and forms. Disclosure controls and procedures include
controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act are properly
recorded, processed, summarized and reported within the time periods required by the Commission's rules and forms.
We carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer (principal
executive officer) and Senior Vice President, Finance and Risk Management (principal financial officer), of the effectiveness of the design and operation of
these disclosure controls and procedures, as such term is defined in Exchange Act Rule 13a-15(e), as of December 31, 2009. Based on this evaluation, the
Chief Executive Officer (principal executive officer) and Senior Vice President, Finance and Risk Management (principal financial officer) concluded that our
disclosure controls and procedures were not effective as of December 31, 2009, the end of the period covered by this Annual Report on Form 10-K, due to the
material weaknesses described below.
(c) Management's Report on Internal Control over Financial Reporting
Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting as defined in
Rules 13a-15(f) and 15d-15(f) under the Exchange Act.
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