8x8 2013 Annual Report Download - page 53

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51
Amortization expense for the customer relationship intangible asset is included in selling, general and administrative expenses.
Amortization expense for technology is included in cost of service revenue. The carrying values of intangible assets were as
follows (in thousands):
Gross Gross
Carrying Accumulated Net Carrying Carrying Accumulated Net Carrying
Amount Amortization Amount Amount Amortization Amount
Technology $ 8,242 $ (1,256) $ 6,986 $ 8,242 $ (432) $ 7,810
Customer relationships 3,305 (1,054) 2,251 3,305 (450) 2,855
Trade names/domains 957 - 957 957 - 957
Total acquired identifiable
intangible assets $ 12,504 $ (2,310) $ 10,194 $ 12,504 $ (882) $ 11,622
March 31, 2013 March 31, 2012
At March 31, 2013, annual amortization of intangible assets, based upon our existing intangible assets and current useful lives,
is estimated to be the following (in thousands):
Amount
2014 $1,334
2015 1,325
2016 1,325
2017 1,318
2018 1,070
Thereafter 2,865
Total $9,237
WARRANTY EXPENSE
The Company accrues for estimated product warranty cost upon revenue recognition. Accruals for product warranties are
calculated based on the Company’s historical warranty experience adjusted for any specific requirements.
WARRANT LIABILITY
The Company accounts for issued warrants in accordance with ASC 480-10 which requires warrants to be classified as
permanent equity, temporary equity or as assets or liabilities. The Company previously had two outstanding warrants that were
classified as liabilities. Both of these warrants expired on December 19, 2010.
RESEARCH, DEVELOPMENT AND SOFTWARE COSTS
The Company accounts for software to be sold or otherwise marketed in accordance with ASC 985-20, Costs of Software to be
Sold, Leased or Marketed (“ASC 985-20”) which requires capitalization of certain software development costs subsequent to
the establishment of technological feasibility. The Company defines establishment of technological feasibility as the
completion of a working model. Software development costs for software to be sold or otherwise marketed incurred prior to the
establishment of technological feasibility are included in research and development and are expensed as incurred. 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.
At March 31, 2013, the Company capitalized $0.2 million of software development costs in accordance with ASC 985-20. At
March 31, 2013, there were no accumulated amortization costs related to capitalized software. Prior to March 31, 2012, costs
incurred by the Company between the completion of the working model and the point at which the product is ready for general
release have been insignificant. Accordingly, all software development costs for software to be sold or otherwise marketed
incurred prior to March 31, 2012 have been expensed as incurred.