Rosetta Stone 2009 Annual Report Download - page 95

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Table of Contents
ROSETTA STONE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
4. ACQUISITIONS (Continued)
purchase price over the fair value of tangible and amortizable intangible assets acquired. No liabilities were assumed in this acquisition, and proforma
requirements were immaterial to the presentation.
5. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following (in thousands):
As of December 31,
2009 2008
Land $ 390 $ 390
Buildings and improvements 7,952 5,437
Leasehold improvements 1,453 1,166
Computer equipment 7,617 6,134
Software 11,327 8,251
Furniture and equipment 2,589 2,060
31,328 23,438
Less: accumulated depreciation (12,954) (7,711)
Property and equipment, net $ 18,374 $ 15,727
The Company leases certain computer equipment, software and machinery under capital lease agreements, with bargain purchase options at the end of
the lease term. As of December 31, 2009 and 2008, leased computer equipment and software included in property and equipment above was $56,000 and
$44,000, respectively.
The Company recorded depreciation expense for the years ended December 31, 2009, 2008 and 2007 in the amount of $5.4 million, $4.0 million and
$2.9 million, respectively.
6. GOODWILL
The value of goodwill is primarily derived from the acquisition of Rosetta Stone, Ltd. in January 2006 and the acquisition of certain assets of SGLC
International Co. Ltd. in November 2009, as detailed in Note 4. The Company tests goodwill for impairment annually on June 30 of each year at the reporting
unit level using a fair value approach, in accordance with the provisions of Accounting Standards Codification topic 350, Intangibles—Goodwill and
Other("ASC 350"). If an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying
value, goodwill will be evaluated for impairment between annual tests. The Company's annual testing resulted in no impairments of goodwill since the dates
of acquisition. For income tax purposes, the goodwill balance is amortized over a period of 15 years.
F-19