Stamps.com 2008 Annual Report Download - page 42

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TABLE OF CONTENTS
STAMPS.COM INC.
NOTES TO FINANCIAL STATEMENTS
1. Description of Business
Our core service allows customers to buy and print United States Postal Service (USPS) approved postage using any
personal computer, an ordinary inkjet or laser printer, and an internet connection. Customers use our service to mail and ship a
variety of mail pieces including postcards, envelopes, flats and packages, using a wide range of USPS mail classes including
First Class Mail®, Priority Mail®, Express Mail®, Media Mail®, Parcel Post®, and others. Our customers include home
businesses, small businesses, corporations and individuals. In 1999, we became the first ever USPS-licensed vendor to offer PC
Postage® in a software-only business model. On August 10, 2004, we publicly launched a market test of PhotoStamps®, which
allows consumers to turn digital photos, designs or images into valid US postage. We are currently under the fourth phase of the
market test for PhotoStamps® with authorization from the USPS through May 16, 2009.
2. Summary of Significant Accounting Policies
Use of Estimates and Risk Management
The preparation of financial statements in conformity with US generally accepted accounting principles requires us to make
estimates and assumptions that affect the amounts reported in the financial statements and the accompanying notes. Actual
results could differ from those estimates, and such differences may be material to the financial statements. Examples include
estimates of loss contingencies, promotional coupon redemptions and estimates regarding the useful lives of patents and other
amortizable intangibles.
Contingencies and Litigation
We are involved in various litigation matters as a claimant and a defendant. We record any amounts recovered in these
matters when received. We record liabilities for claims against us when the loss is probable and estimable. Amounts recorded are
based on reviews by outside counsel, in-house counsel and management. Actual results could differ from estimates.
Cash Equivalents and Investments
We consider all highly liquid investments with an original or remaining maturity of three months or less at the date of
purchase to be cash equivalents.
Our cash equivalents and investments consist of money market, U.S. government obligations, asset-backed securities and
public corporate debt securities at December 31, 2008 and 2007. All investments are classified as available for sale and are
recorded at market value using the specific identification method. Realized gains and losses are reflected in other income, net
while unrealized gains and losses are included as a separate component of stockholders’ equity.
Trade Accounts Receivable
Our trade accounts receivable primarily relate to PC Postage services, PhotoStamps sales and branded insurance provided to
customers prior to billing. Trade accounts receivable, net of allowances for uncollectible accounts of $31,325 and $15,562 as of
December 31, 2008 and 2007, respectively, were approximately $2,962,000 and $2,519,000 as of December 31, 2008 and 2007,
respectively.
We evaluate the collectibility of our accounts receivable based on a combination of factors. If we become aware of a
customer’s inability to meet its financial obligations, an allowance is recorded to reduce the net receivable to the amount
reasonably believed to be collectible from the customer. For all other customers, we recognize allowances for doubtful accounts
based on the length of time the receivables are past due, the current business environment and our historical experience. If the
financial condition of our customers were to deteriorate, resulting in their inability to make payments, additional provisions are
recorded in that period.
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