Stamps.com 2006 Annual Report Download - page 54

STAMPS.COM INC.
NOTES TO FINANCIAL STATEMENTS
2. Summary of Significant Accounting Policies – (continued)
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 based on the Company’s capitalization policy. These capitalized costs are
amortized based on their estimated useful life. Costs related to the maintenance and development of the website content are expensed as
incurred.
Recent Accounting Pronouncements
In June 2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes, an Interpretation of FASB
Statement No. 109” (FIN 48). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements
in accordance with FAS No. 109, “Accounting for Income Taxes.” FIN 48 prescribes a two-step process to determine the amount of tax benefit
to be recognized. First, the tax position must be evaluated to determine the likelihood that it will be sustained upon external examination. If the
tax position is deemed “more-likely-than-not” to be sustained, the tax position is then assessed to determine the amount of benefit to recognize
in the financial statements. The amount of the benefit that may be recognized is the largest amount that has a greater than 50 percent likelihood
of being realized upon ultimate settlement. We are required to adopt FIN 48 effective as of January 1, 2007. The Company is currently
evaluating the effect FIN 48 will have on its financial statements. The Company does not expect the impact will be material.
In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (
Statement 157), which addresses how companies should
measure fair value when they are required to use a fair value measure for recognition or disclosure purposes under generally accepted
accounting principles. Statement 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting
principles and expands disclosures about fair value measurements. Statement 157 is effective for financial statements issued for fiscal years
beginning after November 15, 2007 and should be applied prospectively, except in the case of a limited number of financial instruments that
require retrospective application. The Company is currently evaluating the potential impact of Statement 157 on its financial statements. The
Company does not expect the impact will be material.
In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities-including an
amendment of FAS 115” (Statement 159). Statement 159 allows entities to choose, at specified election dates, to measure eligible financial
assets and liabilities at fair value that are not otherwise required to be measured at fair value. If a company elects the fair value option for an
eligible item, changes in that item’s fair value in subsequent reporting periods must be recognized in current earnings. Statement 159 is
effective for fiscal years beginning after November 15, 2007. The Company is currently evaluating the potential impact of Statement 159 on its
financial statements. The Company does not expect the impact will be material.
3. Goodwill and Intangible Assets
The Company wrote off all of its goodwill in the first quarter of 2001 due to impairment. The Company’s other intangible assets, which
consist of patents, trademarks and other intellectual property with a gross carrying value of $8.3 million and $8.9 million as of December 31,
2006 and 2005, respectively, and accumulated amortization of $6.3 million and $5.2 million as of December 31, 2006 and 2005, respectively,
continue to be amortized over their expected useful lives ranging from 4 to 17 years with a remaining weighted average amortization period of
1 year. During the fiscal years 2006, 2005 and 2004, the Company assessed whether events or changes in circumstances occurred that could
potentially indicate that the carrying amount of the Company’s intangible assets may not be recoverable. The Company concluded that there
were no such events or changes in circumstances during the years ended December 31, 2006, 2005 and 2004 and determined that the fair value
of the Company’s intangible assets were in excess of their carrying value as of December 31, 2006, 2005 and 2004.
Aggregate amortization expense on patents and trademarks was approximately $1.1 million per year for the three years ended
December 31, 2006, 2005, and 2004. Amortization expense on patents and trademarks is estimated to approximate $1.1 million for fiscal year
2007.
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