Tucows 2014 Annual Report Download - page 158

Tucows Inc.
Notes to Consolidated Financial Statements
(Dollar Amounts in U.S. dollars)
1. Organization of the Company:
Tucows Inc. (the “Company”) is a global distributor of Internet services, including domain name registration,
security and identity products through digital certificates, email and mobile telephony services. The Company’s Internet
Services are distributed through its global Internet-based distribution network of Internet Service Providers, web hosting
companies and other providers of Internet services to end-users. In addition, the Company derives Network Access
Services devices revenue from the sale of retail mobile phones and services to individuals and small businesses through
the Ting website using a Mobile Virtual Network Operator model.
2. Significant accounting policies:
The consolidated financial statements have been prepared in accordance with accounting principles generally
accepted in the United States of America (“U.S. GAAP”) and are stated in U.S. dollars, except where otherwise noted.
Certain of the prior year comparative figures have been reclassified to conform with the financial statement presentation
adopted in the current year. In December 2013, our Board of Directors authorized a one-for-four share consolidation of
our common stock, in the form of a reverse stock split, as further described in note 10. All share information related to
shares outstanding and earnings per share have been retroactively adjusted to reflect this share consolidation.
(a) Basis of presentation
These consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries.
All significant intercompany balances and transactions have been eliminated on consolidation.
Investments over which the Company is unable to exercise significant influence are recorded at cost and written
down only when there is evidence that a decline in value that is other than temporary has occurred.
(b) Use of estimates
The preparation of the consolidated financial statements in accordance with U.S. GAAP requires management to
make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related
disclosure of contingent assets and liabilities. On an on-going basis, management evaluates its estimates, including those
related to amounts recognized for or carrying values of revenues, bad debts, goodwill and intangible assets which require
estimates of future cash flows and discount rates, income taxes, contingencies and litigation, and estimates of credit
spreads for determination of the fair value of derivative instruments. Management bases its estimates on historical
experience and on various other assumptions that are believed to be reasonable under the circumstances at the time they
are made. Under different assumptions or conditions, the actual results will differ, potentially materially, from those
previously estimated. Many of the conditions impacting these assumptions and estimates are outside of the Company’s
control.
(c) Cash and cash equivalents
All highly liquid investments, with an original term to maturity of three months or less are classified as cash and
cash equivalents. Cash and cash equivalents are stated at cost which approximates fair value.
(d) Inventory
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