Travelzoo 2005 Annual Report Download - page 60

TRAVELZOO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
(b) Revenue Recognition
All revenue consists of advertising sales. Advertising revenues are principally derived from the sale of
advertising in the U.S. on the Travelzoo Web site, in the Travelzoo Top 20 e-mail newsletter, in NewsÖash
and in SuperSearch. Revenues generated from the Company's operations in the U.K. were approximately
$758,000 during the period from May 4, 2005 (inception) to December 31, 2005.
The Company recognizes revenues in accordance with Securities and Exchange Commission StaÅ
Accounting Bulletin No. 104, Revenue Recognition. Advertising revenues are recognized in the period in
which the advertisement is displayed, provided that evidence of an arrangement exists, the fees are Ñxed or
determinable and collection of the resulting receivable is reasonably assured. Where collectibility is not
reasonably assured, the revenue will be recognized upon cash collection, provided that the other criteria for
revenue recognition have been met. The Company recognizes revenue for Ñxed-fee advertising arrangements
ratably over the term of the insertion order as described below. The majority of insertion orders have terms
that begin and end in a quarterly reporting period. In the cases where at the end of a quarterly reporting period
the term of an insertion order is not complete, the Company recognizes revenue for the period by pro-rating
the total arrangement fee to revenue and deferred revenue based on a measure of proportionate performance of
its obligation under the insertion order. The Company measures proportionate performance by the number of
placements delivered and undelivered as of the reporting date. The Company uses prices stated on its internal
rate card for measuring the value of delivered and undelivered placements. Fees for variable-fee advertising
arrangements are recognized based on the number of impressions displayed or clicks delivered during the
period.
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 reasonably assured. The
Company evaluates each of these criteria as follows:
‚Evidence of an arrangement. The Company considers an 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 click-throughs have been delivered.
‚Fixed or determinable fee. The Company considers the fee to be Ñxed or determinable if the fee is not
subject to refund or adjustment and payment terms are standard.
‚Collection is deemed reasonably assured. The Company conducts a credit review for all transactions
at the time of the arrangement to determine the creditworthiness of the client. Collection is deemed
reasonably assured if it is expected that the client will be able to pay amounts under the arrangement as
payments become due. If it is determined that collection is not reasonably assured, then revenue is
deferred and recognized upon cash collection. Collection is deemed not reasonably assured when a
client is perceived to be in Ñnancial distress, which may be evidenced by weak industry condition,
bankruptcy Ñling, or previously billed amounts that are past due.
The Company's standard payment terms are 30 days net. Insertion orders that include Ñxed-fee
advertising are invoiced upon acceptance of the insertion order and on the Ñrst day of each month over the
term of the insertion order, with the exception of Travelzoo Top 20 or NewsÖash listings, which are invoiced
upon delivery. Insertion orders that include variable-fee advertising are invoiced at the end of the month. The
Company's standard terms state that in the event that Travelzoo fails to publish advertisements as speciÑed in
the insertion order, the liability of Travelzoo to the client shall be limited to, at Travelzoo's sole discretion, a
pro rata refund of the advertising fee, the placement of the advertisements at a later time in a comparable
position, or the extension of the term of the insertion order until the advertising is fully delivered. The
Company believes that no signiÑcant obligations exist after the full delivery of advertising.
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