Table of Contents
Vitae Pharmaceuticals, Inc.
Notes to the Financial Statements (Continued)
For the Years Ended December 31, 2013 and 2012
2. Summary of Significant Accounting Policies and Basis of Accounting (Continued)
are evaluated periodically for impairment. If it is determined that a decline of any investment is other than temporary, then the investment basis is written down to fair value and the
write-down is included in the statements of comprehensive income as a loss.
Deferred Rent and Lease Incentives
Deferred rent and lease incentives consist of the difference between cash payments and the recognition of rent expense calculated on a
prospective straight-line basis for the facility the Company occupies. In August 2011, Vitae amended its facility lease agreement extending the expiration to January 31, 2018 in exchange for
reduced rental rates during the extension period. Lease incentives received at the commencement of the lease are amortized on a straight-line basis over the original lease term and recorded as a
reduction to rent expense. Actual cash rent payments exceeded rent recognition by $4,584 and $119,580 for the years ended December 31, 2013 and 2012, respectively. Deferred rent and lease
incentives were $89,638 and $94,222 as of December 31, 2013 and 2012, respectively.
Fair Value of Financial Instruments
At December 31, 2013 and 2012, the Company's financial instruments included cash and cash equivalents, restricted cash,
marketable securities, accounts payable, accrued expenses, notes payable and preferred stock warrant liability. At December 31, 2012, the Company also carried accounts receivable. The carrying
amount of cash and cash equivalents, restricted cash, accounts receivable, accounts payable and accrued expenses approximates fair value due to the short-term maturities of these instruments. The
Company's short- and long-term marketable securities are carried at fair value based on quoted market prices and other observable inputs. Notes payable approximates fair value because the interest
rate is reflective of the rate the Company could obtain on debt with similar terms and conditions. The carrying value of the preferred stock warrant liability is the estimated fair value of the
liability (Note 5). The Company has evaluated the estimated fair value of financial instruments using available market information and management's estimates. The use of different market
assumptions and/or estimation methodologies could have a significant effect on the estimated fair value amounts.
Comprehensive income is defined as changes in stockholders' deficit exclusive of transactions with owners (such as capital
contributions and distributions). Comprehensive income is comprised of net income and unrealized (losses) gains on marketable securities.
Property and Equipment
Property and equipment consist primarily of laboratory equipment, computer equipment and software, office furniture and equipment and
leasehold improvements, all of which are stated at cost, less accumulated depreciation. Property and equipment are depreciated using the straight-line method over the estimated useful lives of the
assets. Leasehold improvements are amortized over the estimated useful life of the asset or the remaining lease term at the time the asset is placed into service, whichever is shorter.