Stamps.com 2004 Annual Report Download - page 46

F-11
STAMPS.COM INC.
NOTES TO FINANCIAL STATEMENTS (continued)
Segment Information
SFAS No. 131, “Disclosures about Segments of an Enterprise and Related Information” establishes
standards of reporting information regarding operating segments in annual financial statements and requires selected
information for those segments to be presented in interim financial reports issued to stockholders. The Company
operates in a single segment.
Website Development Costs
The Company develops and maintains its website. Costs associated with the operation of the website
consist primarily of software and hardware purchased from third parties, which are capitalized by the Company.
These capitalized costs are amortized based on their estimated useful life. Costs related to maintenance are not
capitalized. Costs related to the development of website content are expensed as incurred.
Recent Accounting Pronouncements
In June 2002, the Financial Accounting Standards Board (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 its financial position or its 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. The Company adopted this statement in December 2002 and its adoption did not
have a material impact on its financial position or results of operations.
In January 2003, 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 entities created before February 1, 2003. The Company has completed its evaluation of
the provisions of FIN 46 and does not have any significant interests in variable interest entities. Accordingly, the
adoption of FIN 46 did not have a material impact on the financial position or the results of operation of the
Company.
In May 2003, the FASB issued SFAS No. 150, “Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equity. SFAS No. 150”, establishes standards for how an issuer classifies and
measures certain financial instruments with characteristics of both liabilities and equity. The Company adopted this
statement in the fourth quarter of 2003 and its adoption did not have a material impact on its financial position or
results of operations.
In November 2004, the FASB issued SFAS No. 151, “Inventory Costs - an amendment of ARB No. 43
Chapter 4”. This statement clarifies the accounting for abnormal amounts of idle facility expense, freight, handling
costs, and spoilage, requiring these items to be recognized as current period charges. In addition, this statement
requires that allocation of fixed production overheads to the costs of conversion be based on the normal capacity of
the production facilities. The provisions of this statement are effective for inventory costs incurred during the fiscal
years beginning after June 15, 2005. The adoption of this statement is not expected to have a significant impact on
the Company’ s financial position or results of operations.