Vistaprint 2011 Annual Report Download - page 65

Inventories
Inventories consist primarily of raw materials and are recorded at the lower of cost or market
value using a first-in, first-out method.
Property, Plant and Equipment
Property, plant and equipment are stated at cost less accumulated depreciation and
amortization. Additions and improvements that substantially extend the useful life of a particular asset
are capitalized while repairs and maintenance costs are expensed as incurred. Depreciation of plant
and equipment is recorded on a straight-line basis over the estimated useful lives of the assets.
Software and Web Site Development Costs
We capitalize eligible salaries and payroll-related costs of employees who devote time to the
development of internal-use computer software. Capitalization begins when the preliminary project stage
is complete, management with the relevant authority authorizes and commits to the funding of the
software project, and it is probable that the project will be completed and the software will be used to
perform the function intended. These costs are amortized on a straight-line basis over the estimated
useful life of the software, which is generally two years. Costs associated with preliminary stage software
development, repair, maintenance or the development of website content are expensed as incurred.
Amortization of previously capitalized amounts in the years ended June 30, 2011, 2010 and
2009 was $6,653, $6,780 and $5,762, respectively, resulting in accumulated amortization of $12,370
and $12,205 at June 30, 2011 and 2010, respectively.
Leases
We categorize leases at their inception as either operating or capital leases. Costs for operating
leases that include incentives such as payment escalations or rent abatements are recognized on a
straight-line basis over the term of the lease. Additionally, inducements received are treated as a reduction
of our costs over the term of the agreement. Leasehold improvements are capitalized at cost and
amortized over the shorter of their expected useful life or the life of the lease, excluding renewal periods.
Business Combinations
We assign the value of the consideration transferred to acquire a business to the tangible
assets and identifiable intangible assets acquired and liabilities assumed on the basis of their fair
values at the date of acquisition. We assess the fair value of assets, including intangible assets, using
a variety of methods and each asset is measured at fair value from the perspective of a market
participant. The method used to estimate the fair values of intangible assets incorporates significant
assumptions regarding the estimates a market participant would make in order to evaluate an asset,
including a market participant’s use of the asset and the appropriate discount rates for a market
participant. Assets recorded from the perspective of a market participant that are determined to not
have economic use for us are expensed immediately. Any excess purchase price over the fair value of
the net tangible and intangible assets acquired is allocated to goodwill. Transaction costs and
restructuring costs associated with a transaction to acquire a business are expensed as incurred.
Intangible Assets
All costs related to patent applications are expensed as incurred. The costs of purchasing
patents from unrelated third parties are capitalized and amortized over the estimated useful life of the
patent. The costs of pursuing others who are believed to infringe on our patents, as well as costs of
defending against patent-infringement claims, are expensed as incurred.
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