8x8 1999 Annual Report Download - page 46

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8X8, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
sold by the distributor or retailer. When no rights of return exist, revenues generated by product sales are recognized upon shipment.
CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS
The Company considers all highly liquid debt instruments with an original maturity of three months or less to be cash equivalents.
Management determines the appropriate classification of debt and equity securities at the time of purchase and reevaluates the classification at
each reporting date. At March 31, 1999 and 1998, the Company classified its investments either as available-for-sale or as trading. The cost of
the Company's investments is determined based upon specific identification. Investments classified as available-for-sale are reported at fair
value with unrealized gains and losses, net of related tax, if any, recorded as a separate component of stockholders' equity. At March 31, 1999
and 1998, the Company's investments classified as available-for-sale totaled $14.1 million and $26.0 million, respectively, and were primarily
comprised of money market funds with an effective maturity of three months or less. Unrealized losses on available-for-sale investments were
$193,000 and $45,000 at March 31, 1999 and 1998, respectively. The investments classified as trading are reported at fair value with realized
and unrealized gains and losses being reported in the statement of operations. The Company did not have any investments classified as trading
at March 31, 1999 and the cost and fair value of investments classified as trading at March 31, 1998 were not significant. Realized and
unrealized gains and losses on the Company's investments classified as trading were also not significant for the years ended March 31, 1999,
1998, and 1997.
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 using
the cost method, because the Company does not have an ability to significantly influence the operating and financial policies of the investees.
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.
41
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