Stamps.com 2004 Annual Report Download - page 42

F-7
STAMPS.COM INC.
NOTES TO FINANCIAL STATEMENTS (continued)
Concentration of Risk
The Company’ s investments are subject to market risk, primarily interest rate and credit risk. The
Company’ s investments are managed by a limited number of outside professional managers within investment
guidelines set by the Company. Such guidelines include security type, credit quality and maturity and are intended to
limit market risk by restricting the Company’ s investments. Investments are held with high-quality financial
institutions, government and government agencies, and corporations, thereby reducing credit risk and 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.
For the years ended December 31, 2004, 2003 and 2002 the Company did not recognize revenue from any
one customer that represented 10% of revenues.
As of December 31, 2004 and 2003, the Company did not have trade accounts receivable from any one
customer that represented 10% of the total trade accounts receivable balance and does not require collateral.
Reclassifications
Certain reclassifications have been made to prior year amounts to conform to current year presentations.
Property and Equipment
Property and equipment are stated at cost. Depreciation and amortization are computed principally on a
straight-line method over the estimated useful life of the asset, ranging from three to five years. 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.
Trademarks and Patents
Trademarks, patents and other intangibles are included in trademarks and patents in the accompanying
balance sheets and are carried at cost less accumulated amortization.
Amortization is calculated on a straight-line basis over the estimated useful lives of the assets, ranging from
4 to 17 years. During twelve months ended, December 31, 2004, 2003 and 2002, amortization expense including the
amortization of goodwill, trademarks and patents, was approximately $1.1 million.
Impairment of Long-Lived Assets and Intangibles
Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that
the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by
a comparison of the carrying amount of an asset to future net cash flows expected to be generated by the asset. If
such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the
carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower
of the carrying amount or fair value less costs to sell.
In July 2001, the Financial Accounting Standards Board (FASB) issued SFAS No. 142 “Goodwill and
Other Intangible Assets,” which establishes financial accounting and reporting for acquired goodwill and other
intangible assets and supersedes APB Opinion No. 17, Intangible Assets. The Company adopted SFAS No. 142
beginning with the first quarter of fiscal 2002. SFAS No. 142 requires that goodwill and intangible assets that have
indefinite useful lives not be amortized but, instead, tested at least annually for impairment while intangible assets
that have finite useful lives continue to be amortized over their respective useful lives.