Property and equipment Goodwill and other intangible assets  Revenue recognition Advertising expense Research and development Income taxes Net income per share 58 Net income per share is computed based on the weighted-average number of common shares outstanding during the periods  presented. Additionally, diluted earnings per share data gives effect to all potentially dilutive common shares that were  outstanding during the periods presented (Note  10 ). Earnings per share in  2004  were positively impacted by the repurchase  of  10 . 8  million shares of the Company’s Class A common stock in October  2003  and the repurchase of  3 . 1  million shares of  the Company’s Class A common stock in July  2004 .  The Company follows the liability method in accounting for income taxes. Under this method, deferred tax assets and li- abilities are determined based on the differences between financial reporting and tax bases of assets and liabilities and are  measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The  Company has netted deferred tax assets and deferred tax liabilities by jurisdiction as of December  31 ,  2004  and reclassified  prior-period balances to conform to the December  31 ,  2004  presentation. Valuation allowances are established when neces- sary to reduce deferred tax assets to the amounts expected to be ultimately realized. The Company accounts for any income  tax contingencies in accordance with SFAS No.  5 , Accounting for Contingencies. The Company’s research and development activities are conducted primarily through its Pharmanex division. Research and  development costs are expensed as incurred and totaled $ 6 . 9  million, $ 6 . 4  million and $ 7 . 7  million in  2002 ,  2003  and  2004 , respectively.  Advertising costs are expensed as incurred. Advertising expense incurred for the years ended December  31 ,  2002 ,  2003 and  2004  totaled approximately $ 2 . 8  million, $ 1 . 4  million and $ 1 . 3  million, respectively.  Revenue is recognized when products are shipped, which is when title and risk of loss pass to independent distributors who  are the Company’s customers. A reserve for product returns is accrued based on historical experience totaling $ 1 . 1  million,  $ 1 . 4  million and $ 2 . 5  million as of December  31 ,  2002 ,  2003  and  2004 , respectively. The Company generally requires cash  or credit card payment at the point of sale. The Company has determined that no allowance for doubtful accounts is neces- sary. Amounts received prior to shipment and title passage to distributors are recorded as deferred revenue. The global  compensation plan for the Company’s distributors generally does not provide rebates or selling discounts to distributors  who purchase its products and services and classifies selling discounts, if any, as a reduction of revenue. Under the provisions of Statements of Financial Accounting Standards (“SFAS”) No.  142 , Goodwill and Other Intangible  Assets (“SFAS  142 ”), the Company’s goodwill and intangible assets with indefinite useful lives are no longer amortized, but  instead are tested for impairment at least annually. The Company’s intangible assets with finite lives are recorded at cost and  are amortized over their respective estimated useful lives to their estimated residual values, and are reviewed for impairment  in accordance with SFAS No.  144 , Accounting for the Impairment or Disposal of Long-Lived Assets (Note  5 ). In addition,  the Company is required to make judgments regarding and periodically assesses the useful life of its intangible assets.  Expenditures for maintenance and repairs are charged to expense as incurred. Property and equipment are recorded at cost and depreciated using the straight-line method over the following estimated  useful lives: Furniture and fixtures  5 – 7  years Computers and equipment  3 – 5  years Leasehold improvements  Shorter of estimated useful life or lease term BioPhotonic Scanners  3  years Vehicles  3 – 5  years