ServiceMagic 2011 Annual Report Download - page 68

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IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Media & Other
Shoebuy's revenue consists of merchandise sales, reduced by incentive discounts and sales returns, and is recognized when delivery to the
customer has occurred. Delivery is considered to have occurred when the customer takes title and assumes the risks and rewards of ownership,
which is on the date of shipment. Allowances for returned merchandise are based on historical experience. Shipping and handling fees billed to
customers are recorded as revenue. The costs associated with shipping goods to customers are recorded as cost of revenue. Revenue of media
businesses included in this segment is generated primarily through online advertising, media production and subscriptions. Online advertising
revenue is recognized every time an ad is displayed or over the period earned, media production revenue is recognized based on delivery and
acceptance and subscription fee revenue is recognized over the terms of the applicable subscriptions, which are one month or one year.
Cash and Cash Equivalents
Cash and cash equivalents include cash and short-term investments, with maturities of less than 91 days from the date of purchase.
Domestically, cash equivalents primarily consist of AAA rated treasury and government agency money market funds and commercial paper
rated A2/P2 or better. Internationally, cash equivalents primarily consist of AAA prime and government money market funds and time deposits.
Marketable Securities
The Company invests in certain marketable securities, which primarily consist of short-to-intermediate-term debt securities issued by states
of the U.S. and subdivisions thereof and investment grade corporate issuers. The Company only invests in marketable securities with active
secondary or resale markets to ensure portfolio liquidity and the ability to readily convert investments into cash to fund current operations, or
satisfy other cash requirements as needed. From time to time, the Company may invest in marketable equity securities as part of its investment
strategy. All marketable securities are classified as available-for-sale and are reported at fair value. The unrealized gains and losses on
marketable securities, net of tax, are included in accumulated other comprehensive income as a separate component of shareholders' equity. The
specific-identification method is used to determine the cost of securities sold and the amount of unrealized gains and losses reclassified out of
accumulated other comprehensive income into earnings.
The Company employs a methodology that considers available evidence in evaluating potential other-than-temporary impairments of its
investments. Investments are considered to be impaired when a decline in fair value below the amortized cost basis is determined to be other-
than-temporary. Factors considered in determining whether a loss is other-than-temporary include the length of time and extent to which fair
value has been less than the amortized cost basis, the financial condition and near-term prospects of the issuer, and whether it is not more likely
than not that the Company will be required to sell the security before the recovery of the amortized cost basis, which may be maturity. If a
decline in fair value is determined to be other-than-temporary, an impairment charge is recorded in current earnings and a new cost basis in the
investment is established.
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