Tucows 2012 Annual Report Download - page 86

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F-10
The Company continually evaluates whether events or circumstances have occurred that indicate the remaining
estimated useful lives of its definite- lived intangible assets may warrant revision or that the remaining balance of such
assets may not be recoverable. The Company uses an estimate of the related undiscounted cash flows over the remaining
life of the asset in measuring whether the asset is recoverable. There was no impairment recorded on definite-life
intangible assets and other long-lived assets during 2012 and 2011.
(g) Revenue recognition
The Company’s revenues are derived from domain name registration fees on both a wholesale and retail basis,
the sale of domain names, the provisioning of other Internet services and advertising and other revenue. Amounts
received in advance of meeting the revenue recognition criteria described below are recorded as deferred revenue.
The Company earns registration fees in connection with each new, renewed and transferred-in registration and
from providing provisioning of other Internet services to resellers and registrars on a monthly basis. Service has been
provided in connection with registration fees once the Company has confirmed that the requested domain name has been
appropriately recorded in the registry under contractual performance standards.
Domain names are generally purchased for terms of one to ten years. Registration fees charged for domain
name registration and provisioning services are recognized on a straight-line basis over the life of the contracted term.
Other Internet services that are provisioned for annual periods or longer, are recognized on a straight-line basis over the
life of the contracted term. Other Internet services that are provisioned on a monthly basis are recognized as services are
provided.
For arrangements with multiple deliverables, the Company allocates revenue to each deliverable if the delivered
item(s) has value to the customer on a standalone basis and, if the arrangement includes a general right of return relative
to the delivered item, delivery or performance of the undelivered item(s) is considered probable and substantially in the
control of the Company. The fair value of the selling price for a deliverable is determined using a hierarchy of (1)
Company specific objective and reliable evidence, then (2) third-party evidence, then (3) best estimate of selling price.
The Company allocates any arrangement fee to each of the elements based on their relative selling prices.
Revenue generated from the sale of domain names, earned from transferring the rights to domain names under
the Company’s control, are recognized once the rights have been transferred and payment has been received in full.
The Company also generates advertising and other revenue through its online libraries of shareware, freeware
and online services presented on its website. Advertising and other revenues are recognized ratably over the period in
which it is presented. To the extent that minimum guaranteed impressions are not met, the Company defers recognition
of the corresponding revenues until the guaranteed impressions are achieved.
In those cases where payment is not received at the time of sale, additional conditions for recognition of
revenue are that the collection of the related accounts receivable is reasonably assured and the Company has no further
performance obligations. The Company records costs that reflect expected refunds, rebates and credit card charge-backs
as a reduction of revenues at the time of the sale based on historical experiences and current expectations.
The Company establishes provisions for possible uncollectible accounts receivable and other contingent
liabilities which may arise in the normal course of business. Historically, credit losses have been within the Company’s
expectations and the provisions the Company has established have been appropriate. However, the Company has, on
occasion, experienced issues which have led to accounts receivable not being fully collected. Should these issues occur
more frequently, additional provisions may be required.
(h) Deferred revenue
Deferred revenue primarily relates to the unearned portion of revenues received in advance related to the
unexpired term of registration fees from domain name registrations and other Internet services, on both a wholesale and
retail basis, net of external commissions. Revenue received in advance of the provision of services from our software
libraries advertising is deferred and recognized in the month that the services are provided.