Vistaprint 2006 Annual Report Download - page 67

Table of Contents VISTAPRINT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Years Ended June 30, 2006, 2005 and 2004
(in thousands, except share and per share data)
Revenue Recognition
Customer orders are received via the Company’s websites and are primarily paid for using credit cards, and also through direct bank debit,
wire transfers and other payment methods. The Company recognizes revenue arising from sales of printed goods when it is realized or realizable
and earned. The Company considers revenue realized or realizable and earned when it has persuasive evidence of an arrangement, the product
has been shipped and title and risk of loss transfers to the customer, the net sales price is fixed or determinable and collectibility is reasonably
assured. The Company offers discounts to its customers through various advertising campaigns which often contain sales offers that include
discounts on the Company’s list prices. These discounts are recognized as a reduction of revenue in the Company’s consolidated statement of
operations at the time revenue is recognized.
The Company also generates revenue from order referral fees received from merchants for customer click−throughs and orders that are
placed on the merchants’ websites. Revenue generated from order referrals is recognized in the period that the click−through impression is
delivered, provided that there is persuasive evidence of an arrangement, the fee is fixed or determinable, no significant obligations remain and
collection is reasonably assured.
A reserve for sales returns and allowances is recorded based on historical experience or specific identification of an event necessitating a
reserve.
Shipping, handling and processing costs billed to customers are included in revenue and the related costs are included in cost of revenue.
Cost of Revenue
Cost of revenue consists of materials used to generate printed products, payroll and related expenses for printing personnel, supplies,
depreciation of equipment used in the printing process, shipping charges and other miscellaneous related costs of products sold by the Company
(see Note 3).
Marketing and Selling Expense
Marketing and selling expense consists of advertising expenses, salaries and overhead related to sales, marketing and customer design
sales and service activities, credit card processing fees and miscellaneous related costs.
All advertising costs are expensed as incurred. Advertising production costs are expensed as the costs to produce the advertising are
incurred. Advertising communication costs are expensed at the time of communication. Advertising expenses for the years ended June 30, 2006,
2005 and 2004 were $26,687, $14,010 and $11,500, respectively.
Technology and Development Expense
Technology and development expense consists primarily of payroll and related expenses for software development, information technology
operations, website hosting, amortization of capitalized software and website development costs, equipment depreciation, patent amortization and
miscellaneous infrastructure−related costs. Technology and development expense also includes the amortization of purchase costs related to
content images used in the Company’s graphic design process.
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