Vistaprint 2014 Annual Report Download - page 63

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Company specific objective and reliable evidence, then (2) third-party evidence, then (3) best estimate of selling
price. We allocate any arrangement fee to each of the elements based on their relative selling prices.
Shipping, handling and processing costs billed to customers are included in revenue and the related costs
are included in cost of revenue at the time of shipment or rendering of service. Sales and purchases in jurisdictions
which are subject to indirect taxes, such as value added tax (“VAT”), are recorded net of tax collected and paid as
we act as an agent for the government.
We sell vouchers through discount voucher websites which do not have an expiration date. Upon issuance
of the voucher, a liability is established for its cash value. We relieve the liability and recognize revenue on a gross
basis, as we are the primary obligor, when redeemed items are shipped. Over time, some portion of these vouchers
is not redeemed and if there is not a legal obligation to remit the unredeemed voucher to the relevant jurisdiction, an
estimated redemption factor may be applied. We are in the process of evaluating historical data in order to
determine the portion of discount vouchers that will not be redeemed based on our customer redemption patterns.
However, we currently have not established sufficient history and the unredeemed coupons remain in deferred
revenue.
A reserve for sales returns or replacements and allowances is recorded based on historical experience or
specific identification of an event necessitating a reserve.
Advertising Expense
Advertising costs are expensed as incurred and included in marketing and selling expense. Advertising
expense for the years ended June 30, 2014, 2013 and 2012 was $267,655, $287,167 and $252,812, respectively,
which consisted of external costs related to customer acquisition and retention marketing campaigns.
Research and Development Expense
Research and development costs are expensed as incurred and included in technology and development
expense. Research and development expense for the years ended June 30, 2014, 2013 and 2012 was $26,423,
$24,690 and $19,707, respectively, which consisted of costs related to enhancing our manufacturing engineering
and technology capabilities.
Income Taxes
As part of the process of preparing our consolidated financial statements, we estimate our income taxes in
each of the jurisdictions in which we operate. This process involves estimating our current tax expense and
assessing temporary and permanent differences resulting from differing treatment of items for tax and financial
reporting purposes. We recognize deferred tax assets and liabilities for the temporary differences using the enacted
tax rates and laws that will be in effect when we expect temporary differences to reverse. We assess the ability to
realize our deferred tax assets based upon the weight of available evidence both positive and negative. To the
extent we believe that it is more likely than not that that some portion or all of the deferred tax assets will not be
realized, we establish a valuation allowance. In the event that actual results differ from our estimates or we adjust
our estimates in the future, we may need to increase or decrease income tax expense, which could have a material
impact on our financial position and results of operations.
We recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax
position will be sustained upon examination by the taxing authorities, based on the technical merits of the tax
position. The tax benefits recognized in our financial statements from such positions are measured on the largest
benefit that has a greater than 50% likelihood of being realized upon ultimate resolution. The unrecognized tax
benefits will reduce our effective tax rate if recognized. Interest and, if applicable, penalties related to unrecognized
tax benefits are recorded in the provision for income taxes.
Form 10-K