ServiceMagic 2012 Annual Report Download - page 57

IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
CityGrid Media's revenue is primarily generated through the sale of local and national online advertising. There are several types of
internet advertisements, and the way in which advertising revenue is earned varies among them. Depending upon the terms, revenue might be
earned every time a user clicks on an ad, every time an ad is displayed, or every time a user clicks-through on the ad and takes a specified action
on the destination site.
Media
Revenue of media businesses included in this segment is generated primarily through advertising, media production and subscriptions.
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.
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. Accruals 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.
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 money market funds. Internationally, cash equivalents primarily consist of AAA
rated 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
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.
Accounts Receivable
Accounts receivable are stated at amounts due from customers, net of an allowance for doubtful accounts and revenue reserves. Accounts
receivable outstanding longer than the contractual payment terms are considered past due. The Company determines its allowance by
considering a number of factors, including the length of time accounts receivable are past due, the Company's previous loss history, the specific
customer's ability to pay its obligation to the Company and the condition of the general economy and the customer's industry. The Company
writes off accounts receivable when they become uncollectible. The Company also maintains allowances to reserve for potential credits issued to
customers or other revenue adjustments. The amount of these reserves are based, in part, on historical experience.
Property and Equipment