Travelzoo 2005 Annual Report Download - page 42

client is perceived to be in Ñnancial distress, which may be evidenced by weak industry conditions, a
bankruptcy Ñling, or previously billed amounts that are past due.
Revenues from advertising sold to clients through agencies are reported at the net amount billed to the
agency.
Allowance for Doubtful Accounts
We record a provision for doubtful accounts based on our historical experience of write-oÅs and a detailed
assessment of our accounts receivable and allowance for doubtful accounts. In estimating the provision for
doubtful accounts, management considers the age of the accounts receivable, our historical write-oÅs, the
creditworthiness of the client, the economic conditions of the client's industry, and general economic
conditions, among other factors. Should any of these factors change, the estimates made by management will
also change, which could impact the level of our future provision for doubtful accounts. SpeciÑcally, if the
Ñnancial condition of our clients were to deteriorate, aÅecting their ability to make payments, additional
provision for doubtful accounts may be required.
Liability to Former Stockholders
On October 15, 2004, we announced a program under which we would make cash payments to persons
who establish that they were former stockholders of Travelzoo.com Corporation, and who failed to submit
requests for shares in Travelzoo Inc. within the required time period. We account for the cost of this program
as an expense recorded in general and administrative expenses and a current accrued liability. The ultimate
total cost of this program is not reliably estimable because it is based on the ultimate number of valid requests
received and future levels of the Company's common stock price. The Company's common stock price aÅects
the liability because the amount of cash payments under the program is based in part on the recent level of the
stock price at the date valid requests are received. We do not know how many of the requests for shares
originally received by Travelzoo.com Corporation in 1998 were valid. We believe that only a portion of such
requests were valid. In order to receive payment under the program, a person is required to establish that such
person validly held shares in Travelzoo.com Corporation.
Since the total cost of the program is not reliably estimable, the amount of expense recorded in a period is
equal to the number of actual claims received during the period multiplied by (i) the number of shares held by
each individual former stockholder and (ii) the applicable settlement price based on the recent price of our
common stock at the date the claim is received as stipulated by the program. Requests are generally paid
within 30 days of receipt. Please refer to Note 2 to our audited consolidated Ñnancial statements for further
details about our liabilities to former stockholders.
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