Tucows 2013 Annual Report Download - page 84

The Company derives revenues from the provisioning of mobile phone services through its Ting website. These
revenues are recognized once services have been provided. Revenues for wireless services are billed based on the actual
amount of monthly services utilized by each customer during their billing cycle on a postpaid basis. The Company’s billing
cycle for each customer is computed based on the customer’s activation date. As a result, the Company estimates the amount
of revenues earned but not billed from the end of each billing cycle to the end of each reporting period. In addition, revenues
associated with the sale of wireless devices and accessories to subscribers is recognized when title and risk of loss is
transferred to the subscriber and shipment has occurred. Incentive marketing credits given to customers are recorded as a
reduction of revenue.
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.
F-10
(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.
(i) Accreditation fees payable
In accordance with ICANN rules, the Company has elected to pay ICANN fees incurred on the registration of
Generic Top-Level Domains on an annual basis. Accordingly, accreditation fees that relate to registrations completed prior to
ICANN rendering a bill are accrued and reflected as accreditation fees payable.
(j) Prepaid domain name registry fees
Prepaid domain name registry and other Internet services fees represent amounts paid to registries, and country code
domain name operators for updating and maintaining the registries, as well as to suppliers of other Internet services. Domain
name registry and other Internet services fees are recognized on a straight-line basis over the life of the contracted
registration term.
(k) Translation of foreign currency transactions
The Company’s functional currency is the United States dollar. Monetary assets and liabilities of the Company and
of its wholly owned subsidiaries that are denominated in foreign currencies are translated into United States dollars at the
exchange rates prevailing at the balance sheet dates. Non-monetary assets and liabilities are translated at the historical
exchange rates. Transactions included in operations are translated at the average rate for the year. A foreign exchange gain
amounting to $0.3 million has been recorded in general and administrative expenses during the year ended December 31,
2013 (“Fiscal 2013”). A foreign exchange gain amounting to $8,000 has been recorded in general and administrative
expenses during the year ended December 31, 2012 (“Fiscal 2012”). A foreign exchange loss amounting to $0.1 million has
been recorded in general and administrative expenses during the year ended December 31, 2011 (“Fiscal 2011”).
(l) Derivative Financial Instruments