Vistaprint 2015 Annual Report Download - page 69

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redomiciliation of our publicly traded parent company from Bermuda to the Netherlands in August 2009. The
cancellation of the treasury shares resulted in a reduction of additional paid in capital and retained earnings for the
year ended June 30, 2013.
Revenue Recognition
We generate revenue primarily from the sale and shipping of customized manufactured products, as well
as providing digital services, website design and hosting, email marketing services, order referral fees and other
third party offerings. We recognize revenue arising from sales of products and services when we have persuasive
evidence of an arrangement, the product has been shipped or service rendered with no significant post-delivery
obligations on our part, the net sales price is fixed or determinable and collectability is reasonably assured. For
subscription services we recognize revenue for the fees charged to customers ratably over the term of the service
arrangement. Revenue is recognized net of discounts we offer to our customers as part of advertising campaigns.
Revenue from sales of prepaid orders on our websites are deferred until shipment of fulfilled orders or until the
prepaid service has been rendered.
For arrangements with multiple deliverables, we allocate revenue to each deliverable if the delivered item(s)
has value to the customer on a standalone basis and, if the arrangement includes a general right of return relative
to the delivered item, delivery or performance of the undelivered item(s) is considered probable and substantially
within our control. The stand-alone selling price for a deliverable is determined using a hierarchy of (1) Company
specific objective and reliable evidence, then (2) third-party evidence, then (3) best estimate of selling price. We
allocate total arrangement fee to each of the deliverables based on their relative stand-alone 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.
For promotions through discount voucher websites, we recognize revenue on a gross basis, as we are the
primary obligor, when redeemed items are shipped. As the vouchers do not expire, any unredeemed vouchers are
recorded as deferred revenue. We recognize revenue on the portion of unredeemed vouchers when the likelihood
of redemption becomes remote (referred to as "breakage") and we determine there is no legal obligation to remit
the value of the unredeemed coupons to government agencies. We estimate the breakage rate based upon the
pattern of historical redemptions. Prior to the fourth quarter of fiscal 2015, we did not have sufficient historical data
to reasonably estimate breakage and, therefore, did not recognize any breakage revenue. During the fourth quarter
of fiscal 2015, we concluded that we have now accumulated sufficient historical data from a large pool of
homogeneous transactions to allow us to reasonably and objectively determine an estimated pattern of historical
redemptions in accordance with our accounting policy. Accordingly, we recognized $3,997 of breakage revenue
during the quarter as a result of this change in estimate and our basic and diluted earnings per share for fiscal 2015
increased by $0.12. We will apply this approach prospectively for future unredeemed voucher activity.
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, 2015, 2014 and 2013 was $286,132, $267,655 and $287,167, 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, 2015, 2014 and 2013 was $30,849,
$26,423 and $24,690, respectively, which consisted of costs related to enhancing our manufacturing engineering
and technology capabilities.
Form 10-K