Rosetta Stone 2012 Annual Report Download - page 88
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Table of Contents
from our company with up to a six month right of return. The Company also allows our retailers to return unsold products, subject to some limitations.
In accordance with Accounting Standards Codification subtopic 985-605-15, ("ASC 985-605-15"), product
revenue is reduced for estimated returns, which are based on historical return rates. Returns have historically been within the Company's previously
established estimates.
In connection with packaged software product sales and online software subscriptions, technical support is provided to customers, including
customers of resellers, via telephone support at no additional cost for up to six months from time of purchase. As the fee for technical support is
included in the initial licensing fee, the technical support and services are generally provided within one year, the estimated cost of providing such
support is deemed insignificant and no unspecified upgrades/enhancements are offered, technical support revenues are recognized together with the
software product and license revenue. Costs associated with the technical support are accrued at the time of sale.
The Company has been engaged to develop language-learning software for certain endangered languages under fixed-fee arrangements. These
arrangements also include contractual periods of post-contract support ("PCS") and online hosting services ranging from one to ten years. Revenue for
multi-element contracts are recognized ratably once the PCS and online hosting periods begin, over the longer of the PCS or online hosting period.
When the current estimates of total contract revenue and contract cost indicate a loss for a fixed fee arrangement, a provision for the entire loss on the
contract is recorded.
Cash and cash equivalents consist of highly liquid investments with original maturities of three months or less and demand deposits with financial
institutions.
Restricted cash is restricted for the reimbursement of funds to employees under the Company's flexible benefit plan and security for a credit card
processing vendor.
Short-term investments generally consist of highly liquid, fixed-income investments with an original maturity at the time of purchase of greater
than three months. Such investments consist of obligations of the U.S. government and its agencies.
Investments are classified as available-for-sale and stated at fair value. The net unrealized gains or losses on available-for-sale securities are
reported as a component of comprehensive income. The specific identification method is used to compute the realized gains and losses on investments.
Investments are periodically reviewed for impairment. If the carrying value of an investment exceeds its fair value and the decline in value is determined
to be other-than-temporary, an impairment loss is recognized for the difference.
F-11