8x8 1998 Annual Report Download - page 39

Download and view the complete annual report

Please find page 39 of the 1998 8x8 annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 70

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70

8X8, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
and 1997. Realized and unrealized gains and losses were also not significant for the years ended March 31, 1998, 1997 and 1996.
INVENTORY
Inventory is stated at the lower of standard cost, which approximates actual cost, using the first-in, first-out method, or market.
NONMARKETABLE EQUITY INVESTMENTS
Nonmarketable equity investments, included in other assets, of less than 20% of the investee's outstanding voting stock are accounted for on the
cost method, because the Company does not have an ability to significantly influence the operating and financial policies of the investees. Loss
resulting from impairment in the value of investments which is other than a temporary decline is recorded in the period in which such loss
occurs.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation and amortization are computed using
the straight-line method, based upon the shorter of the estimated useful lives, ranging from three to five years, or the lease term of the
respective assets as follows:
WARRANTY EXPENSE
The Company provides for the estimated cost which may be incurred under its product warranties upon revenue recognition.
RESEARCH AND SOFTWARE DEVELOPMENT COSTS
Research and development costs are charged to operations as incurred. Software development costs incurred prior to the establishment of
technological feasibility are included in research and development and are expensed as incurred. The Company defines establishment of
technological feasibility as the completion of a working model. Software development costs incurred subsequent to the establishment of
technological feasibility through the period of general market availability of the product are capitalized, if material. To date, all software
development costs have been expensed as incurred.
FOREIGN CURRENCY TRANSLATION
The U.S. dollar is the functional currency of the Company's foreign subsidiary. Exchange gains and losses resulting from transactions
denominated in currencies other than the U.S. dollar are included in the results of operations for the year. To date, such amounts have not been
significant. Total assets of the Company's foreign subsidiary were $620,000, $429,000, and $479,000 as of March 31, 1998, 1997 and 1996,
respectively. The Company does not undertake any foreign currency hedging activities.
INCOME TAXES
Income taxes are accounted for using the asset and liability approach. Under the asset and liability approach, a current tax liability or asset is
recognized for the estimated taxes payable or refundable on tax
34
Machinery and computer equipment 3 years
Furniture and fixtures 5 years
Licensed software 3 years
Leasehold improvements Shorter of lease term or useful life of the asset