Travelzoo 2008 Annual Report Download - page 71

value of the asset group. Assets to be disposed of are reported at the lower of the carrying amount or fair value less
costs to sell. No impairment loss was recognized during the year ended December 31, 2008.
(l) Stock-Based Compensation
The Company applies SFAS No. 123 (revised 2004), “Share-Based Payments” (“SFAS 123R”), to the
accounting for stock-based payment transactions whereby the Company receives employee services in exchange for
equity instruments, including stock options.
The Company did not provide any stock-based compensation in fiscal years 2008, 2007, or 2006. In addition,
all previously issued options vested prior to January 1, 2003. See Note 6 for a further discussion on stock-based
compensation.
(m) Foreign Currency
All foreign subsidiaries use the local currency of their respective countries as their functional currency. Assets
and liabilities are translated at exchange rates prevailing at the balance sheet dates. Revenues, costs and expenses
are translated into U.S. dollars at average exchange rates for the period. Gains and losses resulting from translation
are recorded as a component of accumulated other comprehensive income (loss).
Realized gains and losses from foreign currency transactions are recognized as gain or loss on foreign currency
in the consolidated statements of operations.
(n) Certain Risks and Uncertainties
The Company’s revenues are substantially dependent on the demand for online advertising from travel
companies. A continuing global economic slowdown may have an adverse effect on our business in 2009, as was the
case in the last recession when travel companies reduced or postponed their online marketing spending. In addition,
in the year ended December 31, 2008, one of the Company’s customers accounted for 13% of revenues. The loss of
this significant customer could also have an adverse effect on our future operating results.
During the year ended December 31, 2008, our cash and cash equivalents decreased by $8.5 million to
$14.2 million. We intend to fund anticipated growth from our cash on hand. However, in light of current financial
market conditions, if our cash on hand is not sufficient to meet our future needs, we may not be able to obtain the
necessary financing.
The Company’s cash, cash equivalents and accounts receivable are potentially subject to concentration of
credit risk. Cash and cash equivalents are placed with financial institutions that management believes are of high
credit quality. The accounts receivable are derived from revenue earned from customers located in the U.S. and
internationally. One of the Company’s customers accounted for 16% of gross accounts receivable at December 31,
2008 and two of the Company’s customers accounted for 18% and 14% of gross receivables at December 31, 2007.
The Company maintains an allowance for doubtful accounts based upon its historical experience, the age of the
receivable and customer specific information. Determining appropriate allowances for these losses is an inherently
uncertain process, and ultimate losses may vary from the current estimates. The allowance for doubtful accounts
was $358,000 and $290,000 at December 31, 2007 and 2008, respectively.
(o) Recent Accounting Pronouncements
In September 2006, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial
Accounting Standards (“SFAS”) No. 157, “Fair Value Measurements” (“SFAS 157”). SFAS 157 establishes a
framework for measuring the fair value of assets and liabilities. This framework is intended to provide increased
consistency in how fair value determinations are made under various existing accounting standards which permit, or
in some cases require, estimates of fair market value. SFAS 157 became effective for fiscal years beginning after
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TRAVELZOO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)