Rosetta Stone 2010 Annual Report Download - page 95

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Table of Contents
5. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following (in thousands):
As of December 31,
2010 2009
Land $ 390 $ 390
Buildings and improvements 8,110 7,952
Leasehold improvements 1,682 1,453
Computer equipment 12,046 7,617
Software 13,723 11,327
Furniture and equipment 4,158 2,589
40,109 31,328
Less: accumulated depreciation (19,036) (12,954)
Property and equipment, net $ 21,073 $ 18,374
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, 2010 and 2009, leased computer equipment and software included in property and equipment above was $56,000 and
$56,000, respectively.
The Company recorded depreciation expense for the years ended December 31, 2010, 2009 and 2008 in the amount of $6.6 million, $5.4 million and
$4.0 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.
The following table represents the balance and changes in goodwill for the years ended December 31, 2010 and 2009 (in thousands):
Balance as of January 1, 2009 $ 34,199
SGLC International Co. LTD. acquisition 620
Balance as of December 31, 2009 $ 34,819
No acquisition activity —
Balance as of December 31, 2010 $ 34,819
Effect of change in foreign currency rate 37
Balance as of December 31, 2010 $ 34,856
F-21