Stamps.com 2001 Annual Report Download - page 51

STAMPS.COM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Website Development Costs
The Company develops and maintains its website. Costs associated with the website consist primarily of software purchased from third parties.
The Company capitalizes costs of computer software obtained for internal use in web design and network operations. These capitalized costs
are amortized based on their estimated useful life. Payroll and related costs are not capitalized, as the amounts are immaterial and principally
relate to maintenance. Internal costs related to the development of website content are expensed as incurred.
Recent Accounting Pronouncements
In June 2001, the FASB issued SFAS No. 141, "Business Combinations" and SFAS No. 142, "Goodwill and Other Intangible Assets". SFAS
No. 141 requires business combinations initiated after June 30, 2001 to be accounted for using the purchase method of accounting, and
broadens the criteria for recording intangible assets separate from goodwill. SFAS No. 142 requires the use of a non-amortization approach to
account for purchased goodwill and certain intangibles. Under a non-amortization approach, goodwill and certain intangibles will not be
amortized into results of operations, but instead would be reviewed for impairment and written down and charged to results of operations only
in the periods in which the recorded value of goodwill and certain intangibles is more than its fair value. The Company expects that the
adoption of SFAS No. 141 and SFAS No. 142 will not have a material impact on its financial position or its results of operations.
The FASB also recently issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets", applicable to financial
statements issued for fiscal years beginning after December 15, 2001. The FASB's new rules on asset impairment supersede SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of", and portions of Accounting Principles
Bulletin Opinion 30, "Reporting the Results of Operations". This Standard provides a single accounting model for long-lived assets to be
disposed of and significantly changes the criteria that would have to be met to classify an asset as held-for-sale. Classification as held-for-sale is
an important distinction since such assets are not depreciated and are stated at the lower of fair value and carrying amount. This Standard also
requires expected future operating losses from discontinued operations to be displayed in the period(s) in which the losses are incurred, rather
than as of the measurement date as presently required. The provisions of this Standard are not expected to have a material impact on the
Company's financial position or operating results.
3. The Acquisition, Investment in and Sale of Subsidiary
On March 7, 2000, the Company completed the acquisition of iShip.com, Inc., a development stage enterprise developing Internet-based
shipping technology. In connection with the acquisition, approximately 5.6 million shares of Stamps.com common stock were issued in
exchange for all outstanding iShip.com, Inc. stock. An additional 1.6 million shares of Stamps.com common stock were reserved for issuance
upon exercise of options and warrants assumed in the transaction. 800,000 shares of Stamps.com common stock had been deposited into an
escrow account to compensate the Company for any inaccuracy or breach of any representation, warranty, covenant or agreement of iShip.com,
Inc. as contained in the merger agreement. The escrowed shares have been released pursuant to the terms of the merger agreement.
The acquisition was accounted for as a purchase in accordance with the provisions of APB No. 16. Under the purchase method of accounting,
the purchase price was allocated to the assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition. The
Company recorded intangible assets of $222.4 million and deferred compensation of $24.7 million, which was to be amortized over periods
ranging from three to four years, except for in-process research and development which was written off immediately after the acquisition, which
is included in research and development expense in the accompanying statements of
F-9
2002. EDGAR Online, Inc.