Stamps.com 2001 Annual Report Download - page 49

STAMPS.COM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Fair Value of Financial Instruments
Carrying amounts of certain of the Company's financial instruments, including cash, cash equivalents, restricted cash, short-term investments,
accounts receivable, notes receivable, accrued payroll, and other accrued liabilities, approximate fair value due to their short maturities. The
fair values of investments are determined using quoted market prices for those securities or similar financial instruments.
Concentration of Risk
The Company's cash and cash equivalents, restricted cash and investment portfolio is diversified and consists primarily of investment grade
securities. Investments are held with high-quality financial institutions, government and government agencies, and corporations, thereby
reducing credit risk concentrations. From time to time, the Company's investments held with its financial institutions may exceed Federal
Deposit Insurance Corporation insurance limits. Interest rate fluctuations impact the carrying value of the portfolio. The Company recognized
revenue from one customer that represented approximately 12% of revenues for the year ended December 31, 2001 and from two customers
that represented approximately 20% and 17% for the year ended December 31, 2000.
Reclassifications
Certain reclassifications have been made to prior periods to conform to current period presentations.
Property and Equipment
Property and equipment are stated at cost. Depreciation and amortization are computed principally on a straight-line method over the shorter of
the estimated useful life of the asset or the lease term, ranging from three to five years. Assets acquired under capitalized lease arrangements are
recorded at the present value of the minimum lease payments. The Company has a policy of capitalizing expenditures that materially increase
assets' useful lives and charges ordinary maintenance and repairs to operations as incurred. When property or equipment is disposed of, the cost
and related accumulated depreciation and amortization are removed from the accounts and any gain or loss is included in operations.
Goodwill and Patents
Patents, trademarks and other intangibles are included in goodwill and patents in the accompanying consolidated balance sheets and are carried
at cost less accumulated amortization. During 2001, the Company acquired intellectual property assets relating to Internet-based postage
printing and management from E-Stamp Corporation for approximately $7.5 million, with an estimated useful life of 7 years.
Amortization is calculated on a straight-line basis over the estimated useful lives of the assets, ranging from 4 to 17 years. During 2001, 2000
and 1999, amortization expense including the amortization of goodwill and patents, was approximately $9,618,000, $45,108,000 and $18,000
respectively.
Revenue Recognition
Service revenue is based on monthly convenience fees and the amount of postage used by the customer. Service revenue is recognized in the
period that services are provided. Deferred revenue consisted primarily of pre-payments received for customer referrals under a partnership
marketing arrangement in 2000. Commissions
F-7
2002. EDGAR Online, Inc.