Stamps.com 2003 Annual Report Download - page 30

Table of Contents
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 adoption of the provision of
this Standard on January 1, 2002 did not have a material impact on our financial position or results of operations.
In June 2002, the FASB issued SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities”, effective for exit or
disposal activities that are initiated after December 31, 2002. SFAS No. 146 addresses financial accounting and reporting for costs associated
with exit or disposal activities and nullifies Emerging Issues Task Force Issue No. 94-3, “Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)” and requires that a liability for
a cost associated with an exit or disposal activity be recognized when the liability is incurred and not at the date of an entity’s commitment to
an exit plan. The adoption of SFAS No. 146 did not have a material impact on our financial position or results of operations.
In December 2002, the FASB issued SFAS No. 148, “Accounting for Stock-Based Compensation – Transition and Disclosure, an
Amendment of FASB Statement No. 123”. This statement amends SFAS No. 123, “Accounting for Stock-Based Compensation”, to provide
alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation.
In addition, this Statement amends the disclosure requirement of SFAS No. 123 to require prominent disclosure in both annual and interim
financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported
results. We adopted this statement in December 2002 and its adoption did not have a material impact on our financial position or results of
operations.
In May 2003, the FASB issued SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and
Equity,” effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective as of July 1, 2003. The
adoption of SFAS No. 150 did not have a material impact on our financial position or results of operations.
In January 2003, the FASB issued FASB Interpretation No. (“FIN”) 46, “Consolidation of Variable Interest Entities,” which was originally
effective on July 1, 2003. In December 2003, the FASB deferred the effective date for applying the provisions of FIN 46 to March 31, 2004 for
interests held by public companies in variable interest entities or potential variable interest entities created before February 1, 2003. We have
completed our evaluation of the provisions of FIN 46 and we do not have any significant interests in variable interest entities. Accordingly, the
adoption of FIN 46 did not have a material impact on our financial position or results of operations.
Critical Accounting Policies
General
. Our discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements
which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial
statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and
related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including those related to patents,
restructuring, contingencies and litigation. We base our estimates on historical experience and on various other assumptions that we believe are
reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities
that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our
consolidated financial statements.
Restructuring . We have recorded reserves in connection with our restructuring programs. These reserves include estimates pertaining to
employee separation costs and the settlements of contractual obligations resulting from our actions. Although we do not anticipate significant
changes, the actual costs may differ from these estimates.
Patents and Intangibles. We make estimates of the estimated useful lives of our patents and other amortizable intangibles. These estimates
are made using various assumptions that could change as economic and
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