Travelzoo 2012 Annual Report Download - page 98

Revenues from advertising sold to advertisers through agencies are reported at the net amount billed to the agency.
The Company started selling vouchers for Local Deals in third quarter 2010 and Getaway in second quarter 2011, from local businesses
such as spas, hotels and restaurants. The Company earns a fee for acting as an agent in these transactions which is recorded on a net basis and is
included in revenue upon completion of the voucher sale. Certain merchant contracts in foreign locations allow us to retain fees related to
vouchers sold that are not redeemed by purchasers upon expiration, which we recognize as revenue after the expiration of the redemption period
and after there are no further obligations to provide funds to merchants, subscribers or others.
Reserve for Subscriber Refunds
We record an estimated reserve for subscriber refunds based on our historical experience at the time revenue is recorded for Local Deals
and Getaway voucher sales. We accrue costs associated with refunds in accrued expenses on the consolidated balance sheets. We consider many
key factors such as the historical refunds based upon the time lag since the sale, historical reasons for refunds, time period that remains until the
deal expiration date, any changes in refund procedures and estimates of redemptions and breakage. Should any of these factors change, the
estimates made by management will also change, which could impact the level of our future reserves for subscriber refunds. Specifically, if the
financial condition of our advertisers, the business that is providing the vouchered service, were to deteriorate, affecting their ability to provide
the services to our subscribers, additional reserves for subscriber refunds may be required.
Estimated subscriber refunds that are determined to be recoverable from the merchant are recorded in the consolidated statements of
operations as a reduction to revenue. Estimated subscriber refunds that are determined not to be recoverable from the merchant are presented as a
cost of revenue. If our judgments regarding estimated subscriber refunds are inaccurate, reported results of operations could differ from the
amount we previously accrued.
Allowance for Doubtful Accounts
We record a provision for doubtful accounts based on our historical experience of write-offs 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-offs, the creditworthiness of the advertiser, the economic conditions of the advertiser’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. Specifically, if the financial condition of our advertisers were to deteriorate,
affecting their ability to make payments, additional provision for doubtful accounts may be required.
Income Taxes
We are subject to income taxes in the U.S. and numerous foreign jurisdictions. Significant judgment is required in evaluating our uncertain
tax positions and determining our provision for income taxes. Although we believe we have adequately reserved for our uncertain tax positions,
no assurance can be given that the final tax outcome of these matters will not be different. We adjust these reserves in light of changing facts and
circumstances, such as the closing of a tax audit or the refinement of an estimate. To the extent that the final tax outcome of these matters is
different than the amounts recorded, such differences will impact the provision for income taxes in the period in which such determination is
made. The provision for income taxes includes the impact of reserve provisions and changes to reserves that are considered appropriate, as well
as the related net interest.
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• Collection is deemed reasonably assured. We conduct a credit review for all transactions at the time of the arrangement to
determine the creditworthiness of the advertiser. Collection is deemed reasonably assured if we expect that the advertiser will
be able to pay amounts under the arrangement as payments become due. If we determine that collection is not reasonably
assured, then we defer the revenue and recognize the revenue upon cash collection. Collection is deemed not reasonably
assured when an advertiser is perceived to be in financial distress, which may be evidenced by weak industry conditions, a
bankruptcy filing, or previously billed amounts that are past due.