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Table of Contents
AOL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Allowance for Doubtful Accounts
AOL's receivables consist primarily of two components, receivables from individual subscribers to AOL's subscription access service and receivables
from advertising customers. Management performs separate evaluations of these components to determine if the balances will ultimately be fully collected
considering management's views on trends in the overall aging of receivables as well as past collection experience. In addition, for certain advertising
receivables, management prepares an analysis of specific risks on a customer-by-customer basis. Using this information, management reserves an amount that
is expected to be uncollectible. Receivables are written off when amounts are deemed to be uncollectible and internal collection efforts are closed. At
December 31, 2011 and 2010, the total allowance for doubtful accounts was $8.3 million and $16.1 million, respectively.
Property and Equipment
Property and equipment are stated at cost. Depreciation, which includes amortization of capitalized software costs and amortization of assets under
capital leases, is provided on a straight-line basis over the estimated useful lives of the assets. AOL evaluates the depreciation periods of property and
equipment to determine whether events or circumstances warrant revised estimates of useful lives. Depreciation expense, recorded in costs of revenues and
selling, general and administrative expense, totaled $160.9 million, $196.3 million and $261.1 million for the years ended December 31, 2011, 2010 and 2009,
respectively. Costs related to leasehold improvements are capitalized and amortized over the shorter of the economic useful life of the improvements or the
remaining lease term.
Property and equipment, including assets under capital lease, consist of ($ in millions):
December 31, Estimated
Useful Lives
2011 2010
Land(a) $ 40.5 $ 40.5 —
Buildings and building improvements 276.8 275.5 15 to 40 years
Capitalized internal-use software costs 452.8 561.9 1 to 5 years
Leasehold improvements 97.8 109.1 5 to 15 years
Furniture, fixtures and other equipment 655.7 778.7 2 to 5 years
1,523.6 1,765.7
Less accumulated depreciation (1,018.4) (1,236.5)
Total $ 505.2 $ 529.2
(a) Land is not depreciated.
Capitalized Software
AOL capitalizes certain costs incurred for the development of internal-use software. These costs, which include the costs associated with coding,
software configuration, upgrades and enhancements and are related to both AOL's internal systems (such as billing and accounting) and AOL's user-facing
internet offerings, are included in property and equipment, net in the consolidated balance sheet. For the years ended December 31, 2011, 2010, and 2009,
AOL capitalized $21.1 million, $22.7 million and $48.7 million, respectively, related to the development of internal-use software.
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