8x8 1998 Annual Report Download - page 40

8X8, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
returns for the current year. A deferred tax liability or asset is recognized for the estimated future tax effects attributed to temporary differences
and carryforwards. If necessary, the deferred tax assets are reduced by the amount of benefits that, based on available evidence, are not
expected to be realized.
CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash, cash
equivalents, short-term investments and trade accounts receivable. The Company places its cash, cash equivalents and short-term investments
primarily in market rate accounts with reputable financial institutions. Cash equivalents present risk of changes in value because of interest rate
changes. The Company has not experienced any material losses relating to any investment instruments. The Company sells its products to
OEMs and distributors throughout the world. The Company performs ongoing credit evaluations of its customers' financial condition and
maintains an allowance for uncollectible accounts receivable based upon the expected collectibility of all accounts receivable. At March 31,
1998, one customer accounted for 30% of accounts receivable. At March 31, 1997, three customers accounted for 16%, 15% and 10% of
accounts receivable, respectively.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of the Company's financial instruments, including cash equivalents, short-term investments, accounts receivable, and
nonmarketable equity investments, approximate fair values.
ACCOUNTING FOR STOCK-BASED COMPENSATION
The Company accounts for stock-based awards to employees using the intrinsic value method in accordance with Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees." Accordingly, no compensation cost has been recognized for its stock plans. The
Company provides additional pro forma disclosures as required under Statement of Financial Accounting Standards No. 123 (FAS 123),
"Accounting for Stock-Based Compensation." See Note 6.
RECLASSIFICATIONS
Certain prior year balances have been reclassified to conform with fiscal 1998 presentation.
NET INCOME (LOSS) PER SHARE
In fiscal 1998, the Company adopted Statement of Financial Accounting Standards No. 128 (FAS 128), "Earnings per Share," which was issued
in February 1997, and which requires presentation of both basic and diluted net income
(loss) per share on the face of the statements of operations for all periods presented. Basic net income (loss) per share is computed by dividing
net income
(loss) available to common stockholders (numerator) by the weighted average number of common shares outstanding during the period
(denominator). Diluted net income (loss) per share is computed using the weighted average number of common shares and potential common
shares outstanding during the period. Potential common shares result from the assumed exercise, using the treasury stock method, of
outstanding convertible noncumulative preferred stock (Preferred Stock), common stock options and unvested restricted common stock having
a dilutive effect. All prior years' data in this report have been restated to reflect the adoption of FAS 128. FAS 128 also requires a reconciliation
of the numerators and denominators of the basic and diluted per share calculations.
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