Salesforce.com 2006 Annual Report Download - page 66

Table of Contents
salesforce.com, inc.
Notes to Consolidated Financial Statements—(Continued)
Securities, which are classified as available for sale at January 31, 2007 and 2006, are carried at fair value, with the unrealized gains and losses, net of tax,
reported as a separate component of stockholders' equity. Fair value is determined based on quoted market rates. Realized gains and losses and declines in
value judged to be other-than-temporary on securities available for sale are included as a component of interest income. The cost of securities sold is based on
the specific-identification method. Interest on securities classified as available for sale is also included as a component of interest income.
Gross realized gains and gross realized losses on the sale of available-for-sale securities were less than 1 percent of interest income in fiscal 2007, 2006
and 2005.
Fair Value of Financial Instruments
The carrying amounts of the Company's financial instruments, which include cash and cash equivalents, short term marketable securities, accounts
receivable, accounts payable, and other accrued expenses, approximate their fair values due to their short maturities.
Fixed Assets
Fixed assets are stated at cost. Depreciation is calculated on a straight-line basis over the estimated useful lives of those assets as follows:
Computers, equipment, and software 3 to 5 years
Furniture and fixtures 5 to 7 years
Leasehold improvements Shorter of the estimated useful life or the lease term
When assets are retired, the cost and accumulated depreciation and amortization are removed from their respective accounts and any loss on such
retirement is reflected in operating expenses. When assets are otherwise disposed of, the cost and related accumulated depreciation and amortization are
removed from their respective accounts and any gain or loss on such sale or disposal is reflected in other income.
Impairment of Long-Lived Assets
The Company evaluates the recoverability of its long-lived assets in accordance with SFAS No. 144, Accounting for the Impairment or Disposal of
Long-Lived Assets ("SFAS 144"). Long-lived assets are reviewed for possible impairment whenever events or circumstances indicate that the carrying amount
of such assets may not be recoverable. If such review indicates that the carrying amount of long-lived assets is not recoverable, the carrying amount of such
assets is reduced to fair value.
In addition to the recoverability assessment, the Company routinely reviews the remaining estimated lives of its long-lived assets. Any reduction in the
useful life assumption will result in increased depreciation and amortization expense in the period when such determinations are made, as well as in
subsequent periods.
For goodwill resulting from the Company's acquisition of Sendia Corporation (see Note 3. Acquisition) in April 2006, the Company evaluates the
recoverability of the goodwill in accordance with SFAS No. 142, Goodwill and Other Intangible Assets. The Company tests the balance for impairment
annually in the fourth quarter or more often if and when circumstances indicate that goodwill may not be recoverable. There was no impairment of goodwill
during the year ended January 31, 2007.
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