This excerpt taken from the UNTD 10-Q filed Nov 10, 2008.
Significant Accounting Policies
SegmentsThe Company complies with the reporting requirements of Statement of Financial Accounting Standards ("SFAS") No. 131, Disclosures about Segments of an Enterprise and Related Information. In August 2008, the Company completed the acquisition of FTD. FTD's operating results are now reported as the FTD segment, which is aligned with how management measures and reviews segment performance for internal reporting purposes in accordance with the "management approach" defined in SFAS No. 131. Management has determined that segment income from operations, which excludes depreciation and amortization of intangible assets, is the appropriate measure for assessing performance of its segments and for allocating resources among its segments.
The following significant accounting policies relate to the Company's FTD segment:
FTD Segment Revenue RecognitionProduct revenues and the related cost of goods sold are generally recognized when products are delivered to the customers. Shipping and service fees charged to customers are recognized at the time the product revenue is recognized and are included in product revenue. Shipping costs are included in cost of goods sold. FTD's consumer businesses generally recognize revenue on a gross basis as FTD bears the risks and rewards associated with the revenue generating activities by: (1) acting as a principal in the transaction; (2) establishing prices; (3) being responsible for fulfillment of the order; (4) taking the risk of loss for collection, delivery and returns; and (5) marketing the products and services.
FTD also sells computer systems to its florist members and recognizes revenue in accordance with Statement of Position ("SOP") 97-2, Software Revenue Recognition, as amended by SOP 98-9, Modification of SOP 97-2, "Software Revenue Recognition, with Respect to Certain Transactions". FTD recognizes revenue on hardware which are sold without software at the time of delivery. For hardware sales that include software, revenue is recognized when delivery, installation and customer acceptance have all occurred.
Service revenues based on orders are recognized in the period in which the orders are delivered. Monthly, recurring fees and other service-based fees are recognized in the period in which the service has been provided.
Software to be Sold, Leased or MarketedThe Company follows the provisions of SFAS No. 86, Accounting for the Costs of Computer Software to Be Sold, Leased, or Otherwise Marketed. SFAS No. 86 requires that all costs relating to the purchase or internal development and production of computer software products to be sold, leased or otherwise marketed be expensed in the period incurred unless the requirements for technological feasibility have been established. The Company capitalizes all eligible computer software costs incurred once technological feasibility is established. The Company amortizes these costs using the greater of the straight-line method over a period of three to five years or the revenue method prescribed by SFAS No. 86.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
1. DESCRIPTION OF BUSINESS, BASIS OF PRESENTATION, SIGNIFICANT ACCOUNTING POLICIES, AND RECENT ACCOUNTING PRONOUNCEMENTS (Continued)