Avid 2014 Annual Report Download - page 73

67
net of $1.9 million of costs incurred to sell the assets, was received during 2012 and $1.5 million was received during 2014. The
Company recorded $38.0 million gain on divestiture of Consumer Business and $7.8 million net income from the divested operations
in 2012. The revenues of the Consumer Business for the period prior to the sale in 2012 totaled $46.1 million.
Long-Lived Assets
The Company periodically evaluates its long-lived assets for events and circumstances that indicate a potential impairment. A long-
lived asset is assessed for impairment when the undiscounted expected future cash flows derived from that asset are less than its
carrying value. The cash flows used for this analysis take into consideration a number of factors including past operating results,
budgets and economic projections, market trends and product development cycles. The amount of any impairment would be equal to
the difference between the estimated fair value of the asset, based on a discounted cash flow analysis, and its carrying value.
Advertising Expenses
All advertising costs are expensed as incurred and are classified as marketing and selling expenses. Advertising expenses were not
material in the periods presented.
Research and Development Costs
Research and development costs are expensed as incurred, except for costs that qualify for capitalization. Development costs for
software to be sold that are incurred subsequent to the establishment of technological feasibility, but prior to the general release of the
product, are capitalized. Upon general release, these costs are amortized using the straight-line method over the expected life of the
related products, generally 12 to 36 months. The straight-line method generally results in approximately the same amount of expense
as that calculated using the ratio that current period gross product revenues bear to total anticipated gross product revenues. The
Company periodically evaluates the assets, considering a number of business and economic factors, to determine if an impairment
exits. No amounts have been capitalized during 2014, 2013, and 2012 as the costs incurred subsequent to the establishment of
technological feasibility have not been material.
Income Taxes
The Company accounts for income taxes using an asset and liability approach that requires the recognition of deferred tax assets and
liabilities for the expected future tax consequences of events that have been recognized in the Company’s financial statements or tax
returns. The Company records deferred tax assets and liabilities based on the net tax effects of tax credits, operating loss
carryforwards and temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes
compared to the amounts used for income tax purposes. Deferred tax assets are regularly reviewed for recoverability with
consideration for such factors as historical losses, projected future taxable income and the expected timing of the reversals of existing
temporary differences. The Company is required to record a valuation allowance when it is more likely than not that some portion or
all of the deferred tax assets will not be realized.
The Company accounts for uncertainty in income taxes recognized in its financial statements by applying a two-step process to
determine the amount of tax benefit to be recognized. First, the tax position must be evaluated to determine the likelihood that it will
be sustained upon examination by the taxing authorities, based on the technical merits of the position. If the tax position is deemed
more-likely-than-not to be sustained, the tax position is then assessed to determine the amount of benefit to recognize in the financial
statements. The amount of the benefit that may be recognized is the largest amount that has a greater than 50% likelihood of being
realized upon ultimate settlement. The provision for income taxes includes the effects of any resulting tax reserves (“unrecognized tax
benefits”) that are considered appropriate as well as the related net interest and penalties.
Accounting for Stock-Based Compensation
The Company’s stock-based employee compensation plans allow the Company to grant stock awards, options, or other equity-based
instruments, or a combination thereof, as part of its overall compensation strategy. For stock-based awards granted, the Company
records stock-based compensation expense based on the grant date fair value over the requisite service periods for the individual
awards, which generally equal the vesting periods. The vesting of stock-based award grants may be based on time, performance
conditions, market conditions, or a combination of performance or market conditions.