8x8 2013 Annual Report Download - page 52

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INVENTORY
Inventory is stated at the lower of standard cost, which approximates actual cost using the first-in, first-out method, or market.
Any write-down of inventory to the lower of cost or market at the close of a fiscal period creates a new cost basis that
subsequently would not be marked up based on changes in underlying facts and circumstances. On an on-going basis, the
Company evaluates inventory for obsolescence and slow-moving items. This evaluation includes analysis of sales levels, sales
projections, and purchases by item, as well as raw material usage related to the Company’s manufacturing facilities. If the
Company’s review indicates a reduction in utility below carrying value, it reduces inventory to a new cost basis. If future
demand or market conditions are different than the Company’s current estimates, an inventory adjustment may be required, and
would be reflected in cost of goods sold in the period the revision is made. Inventory was comprised of the following:
2013
2012
Work-in-process
$
23
$
55
Finished goods
488
526
$ 511 $ 581
March 31,
(in thousands)
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. Estimated useful lives of three years are used for equipment and software and five
years for furniture and fixtures. Amortization of leasehold improvements is computed using the shorter of the remaining
facility lease term or the estimated useful life of the improvements. Property and equipment was comprised of the following:
2013
2012
Machinery and computer equipment
$
9,097
$
8,211
Furniture and fixtures
447
252
Licensed software
2,136
1,992
Construction in process
-
90
Leasehold improvements
3,343
263
15,023
10,808
Less: accumulated depreciation and amortization
(8,350)
(6,988)
$ 6,673 $ 3,820
March 31,
(in thousands)
Maintenance, repairs and ordinary replacements are charged to expense. Expenditures for improvements that extend the
physical or economic life of the property are capitalized. Gains or losses on the disposition of property and equipment are
recorded in the income from operations.
GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill and intangible assets with indefinite useful lives are not amortized. Goodwill represents the excess fair value of
consideration transferred over the fair value of net assets acquired in business combinations. The carrying value of goodwill
and indefinite lived intangible assets are not amortized, but are annually tested for impairment and more often if there is an
indicator of impairment.
Intangible assets with finite useful lives are amortized on a straight-line basis over the periods benefited. The Company reviews
the recoverability of its long-lived assets when events or changes in circumstances occur that indicate that the carrying value of
the asset or asset group may not be recoverable. The assessment of possible impairment is based on the Company's ability to
recover the carrying value of the asset or asset group from the expected future pre-tax cash flows (undiscounted and without
interest charges) of the related operations. If these cash flows are less than the carrying value of such asset, an impairment loss
is recognized for the difference between estimated fair value and carrying value. The measurement of impairment requires
management to estimate future cash flows and the fair value of long-lived assets.