Vistaprint 2014 Annual Report Download - page 59

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Accounts Receivable
Accounts receivable includes amounts due from customers and partners. We offset gross trade accounts
receivable with an allowance for doubtful accounts, which is our best estimate of the amount of probable credit
losses in existing accounts receivable. Account balances are charged off against the allowance when the potential
for recovery is considered remote.
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. Costs to produce free products are included in cost of revenues as incurred.
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. Assets that qualify for the capitalization of interest cost during their
construction period are evaluated on a per project basis and, if material, the costs are capitalized. No interest costs
associated with our construction projects were capitalized in fiscal 2014 or 2013 as the amounts were not material.
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 websites and 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. As of July 1, 2012,
we revised the estimated useful life of our capitalized software and website developments costs from 2 to 3 years
based on an evaluation of historical trends, the period of benefit of past projects, and our current project portfolio.
This change in estimated useful life increased our pre-tax income for fiscal year ended June 30, 2013 by
approximately $2,718 when compared to the historical estimated useful life and could have a material impact in the
future. Our basic and diluted earnings per share for fiscal 2013 increased by $0.08 due to this change in estimate.
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, 2014, 2013 and 2012 was
$4,985, $3,118 and $6,325, respectively, resulting in accumulated amortization of $13,538 and $10,315 at June 30,
2014 and 2013, 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.
Capital leases are accounted for as an acquisition of an asset and incurrence of an obligation. Assets held
under capital leases are recorded at the lower of the present value of the minimum lease payments or the fair value
of the leased asset at the inception of the lease, and amortized over the useful life of the asset. The corresponding
capital lease obligation is recorded at the present value of the minimum lease payments at inception of the lease.
For further information on our outstanding capital lease assets and obligations please refer to Note 18
Commitments and Contingencies.
For lease arrangements where we are deemed to be involved in the construction of structural improvements
prior to the commencement of the lease or take some level of construction risk, we are considered the owner of the
assets during the construction period. Accordingly, as the lessor incurs the construction project costs, the assets
and corresponding financial obligation are recorded in our consolidated balance sheet. At June 30, 2014, $18,117 is
Form 10-K