Stamps.com 2003 Annual Report Download - page 48

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Table of Contents
STAMPS.COM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Revenue Recognition
Service revenue is based on monthly convenience fees. Service revenue is recognized in the period that services are provided. Revenue from
the sale of our consumable products and commissions from the advertising or sale of products by a third party vendor to the Company’s
customer base are recognized as revenue when earned and collection is deemed probable.
Computation of Net Loss per Share
Basic loss per share is computed by dividing the net loss available to common stockholders for the period by the weighted average number
of common shares outstanding during the period. Diluted losses per share is computed by dividing the net losses for the period by the weighted
average number of common and common equivalent shares outstanding during the period.
Common equivalent shares, representing incremental common shares issuable upon the exercise of stock options and warrants, are excluded
from the diluted earnings per share calculation as their effect is anti-dilutive due to the net losses in each year.
Advertising Costs
The Company expenses the costs of producing advertisements when the advertising first runs, and expenses the costs of communicating and
placing the advertising in the period in which the advertising space or airtime is used.
Internet advertising expenses are recognized based on specifics of the individual agreements. Under partner or affiliate agreements,
advertising expense is recognized as identified customers are generated from partner or affiliate promotions.
Income Taxes
The Company accounts for income taxes in accordance with Statement of Financial Accounting Standards (SFAS) No. 109, “Accounting
for Income Taxes”. Under this method, deferred tax liabilities and assets are determined based on the difference between the financial
statements and the tax basis of assets and liabilities using the enacted tax rate in effect for the years in which the differences are expected to
reverse. Valuation allowances are recorded to reduce deferred tax assets when it is more likely than not a tax benefit will not be realized.
Research and Development Costs
Research and development costs are expensed as incurred. These costs primarily consist of salaries, development materials, supplies and
applicable overhead expenses of personnel directly involved in the research and development of new technology and service offerings.
Stock-Based Compensation
The Company accounts for its employee stock plan under the intrinsic value method prescribed by Accounting Principles Board Opinion
(APB) No. 25, “Accounting for Stock Issued to Employees”, and related interpretations, and has adopted the disclosure-only provisions of
SFAS No. 123, “Accounting for Stock-Based Compensation” and as amended by SFAS No. 148, “Accounting for Stock-Based Compensation
–
Transition and Disclosure, an amendment of FASB Statement No. 123”.
F-9