Travelzoo 2014 Annual Report Download - page 94

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Insertion orders that include fixed-fee advertising are invoiced upon acceptance of the insertion order and on the first day
of each month over the term of the insertion order, with the exception of Travelzoo Top 20 or Newsflash 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 specified in the insertion
order, the liability of Travelzoo to the advertiser 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 significant obligations exist after the full
delivery of advertising.
Revenues from advertising sold to advertisers through agencies are reported at the net amount billed to the agency.
For Local Deals and Getaways products, 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, members or others.
Commission revenues generated through provision of hotel booking reservations to hotels are recognized upon the
estimated date the stay occurs at the hotel, which includes estimates of cancellations of the hotel bookings based upon historical
patterns. If the hotel booking cannot be canceled then revenue is recognized upon booking.
(c) Reserve for Member Refunds
We record an estimated reserve for member refunds based on our historical experience at the time revenue is recorded for
Local Deals and Getaways 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 member 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
members, additional reserves for member refunds may be required.
Estimated member refunds that are determined to be recoverable from the merchant are recorded in the consolidated
statements of operations as a reduction to revenue. We accrue costs associated with refunds in accrued expenses on the
consolidated balance sheets. Estimated member refunds that are determined not to be recoverable from the merchant, are
presented as a cost of revenue. If our judgments regarding estimated member refunds are inaccurate, reported results of
operations could differ from the amount we previously accrued.
(d) 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.
(e) Use of Estimates
Management of the Company has made a number of estimates and assumptions relating to the reporting of assets,
liabilities, revenues and expenses and the disclosure of contingent assets and liabilities to prepare these financial statements in
conformity with accounting principles generally accepted in the United States of America. Actual results could differ materially
from those estimates.
(f) Cash and Cash Equivalents
Cash equivalents consist of highly liquid investments with remaining maturities of less than three months on the date of
purchase.