Vistaprint 2007 Annual Report Download - page 72

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VISTAPRINT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Years Ended June 30, 2007, 2006 and 2005
(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, revenue share and other fees received
from merchants for customer click-throughs, distribution of third-party promotional materials 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, 2007, 2006 and 2005 were $47,147,
$26,687 and $14,010, 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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