Stamps.com 2010 Annual Report Download - page 64

TABLE OF CONTENTS
STAMPS.COM INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. Summary of Significant Accounting Policies – (continued)
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 deteriorates, resulting in their
inability to make payments, additional provisions are recorded in that period.
Fair Value of Financial Instruments
Carrying amounts of certain of our financial instruments, including cash, cash equivalents, restricted cash, accounts
receivable, and accounts payable, approximate fair value due to their short maturities. The fair values of investments are
determined using quoted market prices for those securities or similar financial instruments.
Concentration of Risk
Our cash, cash equivalents and investments are subject to market risk, primarily interest rate and credit risk. Our investments
are managed by a limited number of outside professional managers within investment guidelines set by us. Such guidelines
include security type, credit quality and maturity and are intended to limit market risk by restricting our investments. From time
to time, our investments held with financial institutions may exceed Federal Deposit Insurance Corporation insurance limits.
Interest rate fluctuations and changes in credit ratings impact the carrying value of our portfolio.
During 2010, 2009 and 2008, we did not recognize revenue from any one customer that represented 10% or more of
revenues.
We have accounts receivable from one customer that represented approximately 21% and 11% of the total accounts
receivable balance as of December 31, 2010 and 2009, respectively.
Inventories
Inventories consist of finished product sold through our supplies store and are accounted for using the lower of cost (first-in,
first-out method) or market. Inventories reported as a component of other current assets in 2010 and 2009 were $2.7 million and
$2.0 million, respectively.
Property and Equipment
Property and equipment are stated at cost. Depreciation is computed on a straight-line method over the estimated useful life
of the asset, ranging from three to five years. Leasehold improvements are amortized over the term of the lease. We have a
policy of capitalizing expenditures that materially increase assets’ useful lives and charging 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
Acquired trademarks, patents and other intangibles are included in intangible assets, net in the accompanying balance sheets
and are carried at cost less accumulated amortization. Cost associated with internally developed intangible assets is typically
expensed as incurred as research and development costs.
Amortization is calculated on a straight-line basis over the estimated useful lives of the assets, ranging from approximately 9
to 17 years. During 2010, 2009 and 2008, amortization expense, including the amortization of trademarks and patents, was
approximately $13,000, $6,000 and $367,000, respectively.
Impairment of Long-Lived Assets and Intangible Assets
Long-lived assets including intangible assets with definitive useful lives 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.
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