EFTA01378084.pdf

Revenue recognition Substantially all of the Company's Dating revenue is derived directly from users in the form of recurring membership fees. Membership revenue is presented net of credits and credit card chargebacks. Revenue recognition occurs ratably over the terms of the applicable membership, which primarily range from one to six months, beginning when there is persuasive evidence of an arrangement. delivery has occurred (access has been granted). the fees are fixed or determinable, and collection is reasonably assured. Members pay in advance, primarily by using a credit card, and, subject to certain conditions identified in our terms and conditions, all purchases are final and nonrefundable. Fees collected in advance for memberships are deferred and recognized as revenue using the straight-line method over the terms of the applicable membership period. Deferred revenue at the dating business is $116.5 million and $117.9 million at December 31, 2013 and 2014. respectively. The Company also earns revenue from online advertising, the purchase of a la carte features and offline events. Online advertising revenue is recognized every time an F-29 Table of Contents ad is displayed. Revenue from the purchase of a la carte features is recognized based on usage. Revenue and the related expenses associated with offline events are recognized when each event occurs. Non-dating revenue consists primarily of fees received for in-person and online test preparation classes, access to online test preparation materials and individual tutoring services. Fees from classes and access to online materials are recognized over the period of the course and the period of the online access, respectively. Tutoring fees are generally collected in the form of membership fees that entitle the member to a certain number of tutoring sessions over a certain period of time. These fees are recognized over the term of the membership based on usage. Deferred revenue at the non-dating business is $3.5 million and $18.0 million at December 31. 2013 and 2014. respectively. Cash and cash equivalents Cash and cash equivalents include cash and short-term investments, with maturities of less than 91 days from the date of purchase. Internationally. cash equivalents primarily consist of AAA rated money market funds and time deposits. Accounts receivable Accounts receivable are stated at amounts due from customers, net of an allowance for doubtful accounts and revenue reserves. Accounts receivable outstanding longer than the contractual payment terms are considered past due. The Company determines its allowance by considering a number of factors, Including the length of time accounts receivable are past due, the Company's previous loss history, the specific customer's ability to pay its obligation to the Company and the condition of the general economy and the customer's industry. The Company wines off accounts receivable when they become uncollectible. The Company also maintains allowances to reserve for potential credits issued to customers or other revenue adjustments. The amounts of these reserves are based, in part, on historical experience. Property and equipment Property and equipment, including significant improvements, are recorded at cost. Repairs and maintenance costs are expensed as incurred Depreciation is computed using the straight-line method over the estimated useful lives of the assets. Estimated Asset category useful lives Computer equipment and capitalized software 2 to 3 years Furniture and other equipment 5 years Leasehold improvements 6 to 7 years The Company capitalizes certain internal use software costs including external direct costs utilized in developing or obtaining the software and compensation for personnel directly associated with the development of the software. Capitalization of such costs begins when the preliminary project stage is complete and ceases when the project is substantially complete and ready for its intended purpose. The net book value of capitalized internal use software is 516.2 million and $20.9 million at December 31. 2013 and 2014. respectively. Business combinations The purchase price of each acquisition is attributed to the assets acquired and liabilities assumed based on their fair values at the date of acquisition. Including identifiable Intangible assets that either arise from a contractual or legal right or are separable from goodwill. The fair value of these intangible assets is based F-30 Table of Contents on detailed valuations that use information and assumptions provided by management. The excess purchase price over the net tangible and identifiable intangible assets is recorded as goodwill. In connection with some business combinations, the Company has entered into contingent consideration arrangements that are determined to be part of the purchase price. Each of these arrangements is initially recorded at its fair value at the time of the acquisition and reflected at current fair value for each subsequent reporting period thereafter until settled. The contingent consideration arrangements are generally based upon earnings performance andor hits: \watt iiec.saw An:hives daW1575189111101(1474691500343,112226453"-lalitmI I I 920139:21:17 Alit) CONFIDENTIAL - PURSUANT TO FED. R. CRIM. P. 6(e) DB-SDNY-0075244 CONFIDENTIAL SONY GM_00221428 EFTA01378084