Stamps.com 2012 Annual Report Download - page 56

STAMPS.COM INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Accounts Receivable
Our accounts receivable relate to PC Postage services, PhotoStamps sales, branded insurance provided to customers prior to billing and other
receivables. Accounts receivable are recorded at the invoiced amount, net of allowances for uncollectible accounts of approximately $239,000
and $117,000 as of December 31, 2012 and 2011, respectively, and were $14.4 million and $10.5 million as of December 31, 2012 and 2011,
respectively.
We evaluate the collectability 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 deteriorates, resulting in their inability to
make payments, additional provisions are recorded in that period. Accounts receivable are written off against the allowance for uncollectible
accounts when we determine amounts are no longer collectible.
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, restricted 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 2012, 2011 and 2010, we did not recognize revenue from any one customer that represented 10% or more of revenues.
We do not have any customers representing 10% or more of total accounts receivable as of December 31, 2012 and 2011, respectively. We have
accounts receivable from one partner that represented approximately 40% and 42% of the total accounts receivable balance as of December 31,
2012 and 2011, respectively.
Inventories
Inventories consist of finished products 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 2012 and 2011 were $3.4 million and $2.2 million, respectively.
Property and Equipment
We account for property and equipment at cost less accumulated depreciation and amortization. We compute depreciation using the straight-
line
method over the estimated useful life of the asset, generally three to five years for furniture, fixtures and equipment and ten to forty years for
building and building improvements. 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.
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