Travelzoo 2002 Annual Report Download - page 33

recognition and the provision for doubtful accounts. These policies, and our procedures related to these
policies, are described in detail below.
Revenue Recognition
We classify our revenues as follows:
‚ Advertising revenues, consisting of listing fees paid by travel companies to advertise their special oÅers
on the Travelzoo website, the Travelzoo Top 20 e-mail newsletter, the Weekend.com e-mail newsletter,
and banner advertising sales. Listing fees are based on placement, number of listings, number of
impressions, or number of clickthroughs. Banner advertising rates are based on CPM rates (cost per
thousand impressions). Smaller advertising agreements Ì typically $2,000 or less per month Ì
typically renew automatically each month if they are not terminated by the client. Larger agreements
are typically related to advertising campaigns and are not automatically renewed.
‚ Commissions revenue, consisting of commissions paid by clients for generating sales through the
Travelzoo website.
We recognize revenue as follows:
‚Advertising Revenues. We recognize advertising revenues in the period in which the advertisement is
displayed, provided that evidence of an arrangement exists, the fees are Ñxed and determinable, no
signiÑcant obligations remain at the end of the period, and collection of the resulting receivable is
deemed probable. If Ñxed-fee advertising is displayed over a term greater than one month, revenues are
recognized ratably over the period. To the extent that any minimum guaranteed impressions are not
met during the contract period, the Company defers recognition of the corresponding revenues until the
guaranteed impressions are achieved. Fees for banner advertising and other variable-fee advertising
arrangements are recognized based on the number of impressions displayed or clicks delivered during
the period.
‚Commissions. We record commissions as the net amount received. We recognize the revenue in the
period that the commissions earned are reported to Travelzoo by the e-commerce partner. Typically, it
takes e-commerce partners between two weeks and three months to report commissions to us.
Under these policies, no revenue is recognized unless persuasive evidence of an arrangement exists,
delivery has occurred, the fee is Ñxed or determinable, and collection is deemed probable. The Company
evaluates each of these criteria as follows:
‚Evidence of an arrangement. We consider a non-cancelable insertion order signed by the client or its
agency to be evidence of an arrangement.
‚Delivery. Delivery is considered to occur when the advertising has been displayed and, if applicable,
the clickthroughs have been delivered.
‚Fixed or determinable fee. We consider the fee to be Ñxed or determinable if the fee is not subject to
refund or adjustment.
‚Collection is deemed probable. We conduct a credit review for all signiÑcant transactions at the time
of the arrangement to determine the creditworthiness of the client. Collection is deemed probable if we
expect that the client will be able to pay amounts under the arrangement as payments become due. If
we determine that collection is not probable, then we defer the revenue and recognize the revenue upon
cash collection.
Provision for Doubtful Accounts
We initially record a provision for doubtful accounts based on our historical experience of write-oÅs and
then adjust this provision at the end of each reporting period based on a detailed assessment of our accounts
receivable and allowance for doubtful accounts. In estimating the provision for doubtful accounts, manage-
ment considers the age of the accounts receivable, our historical write-oÅs, the creditworthiness of the client,
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