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PFSWEB
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
USE OF ESTIMATES
The preparation of combined financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities, and the reported amounts of
revenues and expenses. The allocation of certain expenses (see Notes 1 and 6) in
these financial statements required management estimates and assumptions. Actual
results could differ from those estimates.
REVENUE RECOGNITION
The Company recognizes product revenue upon shipment of product to
customers and provides for estimated returns and allowances. The Company's
service fee revenues are recognized at the time the service is provided to its
client. Certain contracts involve third-party vendors who provide services such
as package delivery. The costs incurred by the Company related to such
third-party services are passed on to clients and are not reflected in revenue
or expense.
COSTS OF REVENUES
The Company recognizes cost of product revenue upon shipment of product to
customers. The Company's cost of service fee revenue is recognized as incurred
and represents costs incurred to provide services under fee-based contracts,
including salaries, shipping, supplies, and facility costs.
CONCENTRATION OF BUSINESS AND CREDIT RISK
All of the Company's product revenue for the fiscal years ended March 31,
1997, 1998 and 1999, was generated by sales of product purchased under master
distributor agreements with one supplier. Sales to Daisytek accounted for
approximately 44%, 22% and 13% of the Company's revenue for the fiscal years
ended March 31, 1997, 1998 and 1999, respectively. No other client accounted for
10% or more of the Company's revenue during such periods. As of March 31, 1998
and 1999, one customer accounted for approximately 39% and 23% of accounts
receivable, respectively.
CASH AND CASH EQUIVALENTS
Cash equivalents are defined as short-term highly liquid investments with
original maturities of three months or less.
ACCOUNTS RECEIVABLE
Accounts receivable include outstanding trade accounts receivables as well
as certain unbilled amounts owed to PFSweb by clients in accordance with
contracts. The amount of unbilled receivables at March 31, 1998 and 1999 was
approximately $726,000 and $2,709,000, respectively.
INVENTORIES
Inventories (merchandise held for resale, all of which are finished goods)
are stated at the lower of weighted average cost or market.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost and are depreciated using the
straight-line method over the estimated useful lives of the respective assets
which range from three to ten years.
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