Google 2012 Annual Report Download - page 60

54 GOOGLE INC. |Form10-K
PART II
ITEM8.Notes to Consolidated Financial Statements
We determine the appropriate classifi cation of our investments in marketable securities at the time of purchase and reevaluate
such designation at each balance sheet date. We have classifi ed and accounted for our marketable securities as available-for-
sale. We may or may not hold securities with stated maturities greater than 12 months until maturity. After consideration of our
risk versus reward objectives, as well as our liquidity requirements, we may sell these securities prior to their stated maturities.
As we view these securities as available to support current operations, we classify securities with maturities beyond 12 months
as current assets under the caption marketable securities in the accompanying Consolidated Balance Sheets. We carry these
securities at fair value, and report the unrealized gains and losses, net of taxes, as a component of stockholders’ equity, except
for unrealized losses determined to be other-than-temporary, which we record as interest and other income, net. We determine
any realized gains or losses on the sale of marketable securities on a specifi c identifi cation method, and we record such gains
and losses as a component of interest and other income, net.
Non-Marketable Equity Securities
We have accounted for non-marketable equity securities either under the equity or cost method. Investments through which we
exercise signifi cant infl uence but do not have control over the investee are accounted for under the equity method. Investments
through which we are not able to exercise signifi cant infl uence over the investee are accounted for under the cost method.
Impairment of Marketable and Non-Marketable Securities
We periodically review our marketable and non-marketable securities for impairment. If we conclude that any of these investments
are impaired, we determine whether such impairment is other-than-temporary. Factors we consider to make such determination
include the duration and severity of the impairment, the reason for the decline in value and the potential recovery period and
our intent to sell. For marketable debt securities, we also consider whether (1)it is more likely than not that we will be required
to sell the security before recovery of its amortized cost basis, and (2) the amortized cost basis cannot be recovered as a result
of credit losses. If any impairment is considered other-than-temporary, we will write down the asset to its fair value and record
the corresponding charge as interest and other income, net.
Accounts Receivable
We record accounts receivable at the invoiced amount and we do not charge interest. We maintain an allowance for doubtful
accounts to reserve for potentially uncollectible receivables. We review the accounts receivable by amounts due by customers
which are past due to identify specifi c customers with known disputes or collectability issues. In determining the amount of the
reserve, we make judgments about the creditworthiness of signifi cant customers based on ongoing credit evaluations. We also
maintain a sales allowance to reserve for potential credits issued to customers. We determine the amount of the reserve based
on historical credits issued.
Inventories
Inventories are stated at the lower of cost or market, computed using the fi rst-in, fi rst-out method.
Property and Equipment
We account for property and equipment at cost less accumulated depreciation and amortization. We compute depreciation
using the straight-line method over the estimated useful lives of the assets, generally two to fi ve years. We depreciate buildings
over periods up to 25 years. We amortize leasehold improvements over the shorter of the remaining lease term or the estimated
useful lives of the assets. Construction in progress is related to the construction or development of property (including land)
and equipment that have not yet been placed in service for our intended use. Depreciation for equipment commences once it is
placed in service and depreciation for buildings and leasehold improvements commences once they are ready for our intended
use. Land is not depreciated.
Software Development Costs
We expense software development costs, including costs to develop software products or the software component of products to
be marketed to external users, before technological feasibility of such products is reached. We have determined that technological
feasibility was reached shortly before the release of those products and as a result, the development costs incurred after the
establishment of technological feasibility and before the release of those products were not material, and accordingly, were
expensed as incurred. Software development costs also include costs to develop software programs to be used solely to meet our
internal needs. The costs we incurred during the application development stage for these software programs were not material
in the years presented.
Business Combinations
We include the results of operations of the businesses that we acquire as of the respective dates of acquisition. We allocate the
fair value of the purchase price of our acquisitions to the tangible assets acquired, and liabilities assumed and intangible assets
acquired, based on their estimated fair values. The excess of the fair value of purchase price over the fair values of these identifi able
assets and liabilities is recorded as goodwill.
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