Stamps.com 2015 Annual Report Download - page 49

TABLE OF CONTENTS
integrations,andisrecognizedintheperiodthatservicesareprovided.Productsales,netofreturnallowances,arerecordedwhenthe
productsareshippedandtitlepassestocustomers.Salesofitems,includingPhotoStamps,soldtocustomersaremadepursuanttoa
salescontractthatprovidesfortransferofbothtitleandriskoflossuponourdeliverytothecarrier.Returnallowancesforexpected
productreturns,whichreduceproductrevenue,areestimatedusinghistoricalexperience.Commissionsfromtheadvertisingorsaleof
productsbyathirdpartyvendortoourcustomerbasearerecognizedwhentherevenueisearnedandcollectionisdeemedprobable.
Customerstypicallypayfacevalueforpostagepurchasedforusethroughourmailingandshippingsoftware,andthefundsare
transferreddirectlyfromthecustomerstotheUnitedStatesPostalService(“USPS”).Wedonotrecognizerevenueforthispostage,as
itispurchasedbyourcustomersdirectlyfromtheUSPS.
Customizedpostagerevenue,whichincludesthefacevalueofpostage,fromthesaleofcustomizedpostagelabelsandrollsis
madepursuanttoasalescontractthatprovidesfortransferofbothtitleandriskoflossuponourdeliverytothecarrier.
SaleofPhotoStampsretailboxesareinitiallyrecordedasdeferredrevenue.PhotoStampsrevenuerelatedtothesaleofthese
PhotoStampsretailboxesissubsequentlyrecognizedwheneither:1)thePhotoStampsretailboxisredeemed,or2)thelikelihoodofthe
PhotoStampsretailboxbeingredeemedisdeemedremote(“breakage”)andthereisnolegalobligationtoremitthevalueofthe
unredeemedPhotoStampsretailboxes.
Onalimitedbasis,weallowthirdpartiestoofferproductsandpromotionstoourcustomerbase.Thesearrangementsgenerally
providepaymentintheformofaflatfeeorrevenuesharingarrangementswherewereceivepaymentuponcustomersaccessingthird
partyproductsandservices.Totalrevenuefromsuchadvertisingarrangementswasnotsignificantduring2015,2014and2013.
Weprovideourcustomerswiththeopportunitytopurchaseparcelinsurancedirectlythroughoursolutions.Insurancerevenue
representsthegrossamountchargedtothecustomerforpurchasinginsuranceandtherelatedcostrepresentstheamountpaidtoour
insurancebrokers.Werecognizerevenueoninsurancepurchasesupontheshipdateoftheinsuredpackage.
PhotoStamps Retail Boxes
WesellPhotoStampsretailboxesthatareredeemableforPhotoStampsonourwebsite.ThePhotoStampsretailboxesaresold
throughvariousthirdpartyretailpartners.OurPhotoStampsretailboxesarenotsubjecttoadministrativefeesonunredeemedboxes
andhavenoexpirationdate.PhotoStampsretailboxsalesarerecordedasdeferredrevenue.Weconcludedthatsufficientcompany-
specifichistoricalevidenceexistedtodeterminetheperiodoftimeafterwhichthelikelihoodofthePhotoStampsretailboxesbeing
redeemedwasremote.Basedonouranalysisoftheredemptiondata,weestimatethatperiodoftimetobe60monthsafterthesaleof
ourPhotoStampsretailboxes.
WerecognizebreakagerevenuerelatedtoourPhotoStampsretailboxesutilizingtheredemptionrecognitionmethod.Underthe
redemptionrecognitionmethod,werecognizebreakagerevenuefromunredeemedretailboxesinproportiontotherevenuerecognized
fromtheretailboxesthathavebeenredeemed.RevenuefromourPhotoStampsretailboxesisincludedinPhotoStampsrevenue.
PhotoStampsretailboxbreakagerevenueduring2015,2014and2013wasnotsignificanttoourconsolidatedfinancialstatements.
Business Combinations
Theacquisitionmethodofaccountingisusedforbusinesscombinations.Theresultsofoperationsofacquiredbusinessesare
includedinourconsolidatedfinancialstatementsprospectivelyfromthedateofacquisition.Thefairvalueofpurchaseconsiderationis
allocatedtotheassetsacquired,liabilitiesassumedandnon-controllinginterestsintheacquiredentitygenerallybasedontheirfair
valueattheacquisitiondate.Theexcessofthefairvalueofpurchaseconsiderationoverthefairvalueoftheassetsacquired,liabilities
assumedandnon-controllinginterestsintheacquiredentityisrecordedasgoodwill.Theprimaryitemsthatgenerategoodwillinclude
synergiesbetweentheacquiredbusinessandtheCompanyandtheacquiredassembledworkforce,neitherofwhichqualifiesfor
recognitionasanintangibleasset.Acquisition-relatedexpensesarerecognizedinourconsolidatedfinancialstatementsasincurred.
Goodwill and Intangible Assets
Goodwillrepresentstheexcessofthefairvalueofconsiderationgivenoverthefairvalueofthetangibleassets,identifiable
intangibleassetsandliabilitiesassumedinabusinesscombination.Goodwillisnotsubjectto
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