Vistaprint 2008 Annual Report Download - page 72

VISTAPRINT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Years Ended June 30, 2008, 2007 and 2006
(in thousands, except share and per share data)
institutions. The risk with respect to accounts receivables is reduced by the Company’s policy of
monitoring the creditworthiness of its customers to which it grants credit terms in the normal course of
business. One customer accounted for 28% of the Company’s total accounts receivable at June 30,
2008, and one customer accounted for 42% of the Company’s total accounts receivable at June 30,
2007.
The Company maintains an allowance for doubtful accounts for potential credit losses based
upon specific customer accounts and historical trends, and such losses in the aggregate have not
exceeded the Company’s expectations.
Inventories
Inventories consist primarily of raw materials and are stated at the lower of first-in, first-out cost or
market.
Property, Plant and Equipment
Property, plant and equipment are stated at cost less allowance for depreciation and
amortization. Additions and improvements that substantially extend the useful life of a particular asset
are capitalized while repairs and maintenance costs are charged to expense as incurred. Interest on
borrowings is capitalized during the active construction period of major capital projects. Capitalized
interest is recorded as part of the asset to which it relates and is amortized over the asset’s estimated
useful life. Upon sale or disposition of an asset, the cost and related accumulated depreciation are
removed from the accounts. Depreciation of plant and equipment has been provided using the straight-
line method over the estimated useful lives of the assets as follows:
Building and building improvements ........... 10–30years
Land improvements .......................... 10years
Machinery and print production equipment ..... 4–10years
Computer software and equipment ............ 3years
Furniture, fixtures and office equipment ........ 5 – 7 years
Leasehold improvements ..................... Shorter of lease term or remaining
life of the asset
Software and Web Site Development Costs
The Company capitalizes eligible costs associated with software developed or obtained for
internal use in accordance with American Institute of Certified Public Accountants (“AICPA”) Statement
of Position 98-1, Accounting for the Costs of Computer Software Developed or Obtained for Internal
Use, and Emerging Issues Task Force (“EITF”) 00-2, Accounting for Web Site Development Costs.
Costs associated with the development of software for internal-use are capitalized if the software is
expected to have a useful life beyond one year and amortized over the software’s useful life, which is
approximately two years. Costs associated with preliminary stage software development, repair,
maintenance or the development of website content are expensed as incurred. Total software
development costs capitalized in the years ended June 30, 2008, 2007 and 2006 were $5,696, $4,189
and $2,656, respectively. Costs associated with the acquisition of content images used in the
Company’s graphic design process that have useful lives greater than one year, such as digital images
and artwork, are capitalized and amortized over their useful lives, which approximate two years.
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