Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2011

Significant Accounting Policies [Text Block]

4.	Summary of Significant Accounting Policies

Fair value of financial instruments

The Company’s financial instruments consist primarily of cash and cash equivalents, accounts receivable and accounts payable. The book value of cash and cash equivalents, accounts receivable and accounts payable is considered to be representative of their values because of their short term maturities. Due to the Company’s relationship, the carrying value of the revolving loan with a related party approximates fair value, as determined by comparison of rates currently available for obligations with similar terms and maturities.

Revenue Recognition

Revenue is recognized when persuasive evidence of an arrangement exists, the price is fixed or determinable, the collectability is reasonably assured, and the delivery and acceptance of the equipment has occurred or services have been rendered. Management exercises judgment in evaluating these factors in light of the terms and conditions of its customer contracts and other existing facts and circumstances to determine appropriate revenue recognition. Due to the Company’s limited commercial sales history, its ability to evaluate the collectability of customer accounts requires significant judgment. The Company periodically evaluates its customers for collectability at the date of sale and periodically thereafter.

The Company’s revenue is net of any collections of state or municipal taxes, fees or surcharges on the charges to customers for the products that they purchase. Revenues are also offset by a reserve for any price refunds and consumer rebates consistent with Accounting Standards Codification (“ASC”) Topic 605-50. In addition, revenues are also offset to reflect any consideration given by a vendor to a customer for whom an otherwise identifiable benefit has not been received. This consideration includes warrants given to a customer (See Note 7).

During the three months ended June 30, 2011 the Company shipped $3,668 of units previously recorded as deferred revenue as of March 31, 2011 and as such recorded this as revenue in the three months ended June 30, 2011. Prior to the shipment of these units, these units were held and revenue deferred by the Company pending shipment to the ultimate customer.

During the three months ended March 31, 2011 the Company shipped $2,356 of units previously recorded as deferred revenue as of December 31, 2010 and as such recorded this as revenue in the six months ended June 30, 2011. Prior to the shipment of these units, these units were held and revenue deferred by the Company pending shipment to the ultimate customer.

Reclassification

Certain accounts in the prior year condensed consolidated financial statements have been reclassified for comparative purpose to confirm to the presentation in the current year condensed consolidated financial statements. The reclassifications have no effect on the previously reported net loss.

Recent Accounting Pronouncements

There were various other updates recently issued, most of which represented technical corrections of accounting literature or application to specific industries and are not expected to have a material impact on the Company’s condensed consolidated financial position, results of operations or cash flows.

- Definition

The entire disclosure for all significant accounting policies of the reporting entity.

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WORLDGATE COMMUNICATIONS INC 10-Q/A