Salesforce.com 2010 Annual Report Download - page 68

Table of Contents
Investment Income
Investment income consists of interest income, realized gains, and realized losses on the Company's cash, cash equivalents and marketable securities.
The components of investment income are presented below (in thousands):
Fiscal Year Ended January 31,
(In thousands) 2011 2010 2009
Interest income $ 28,273 $ 21,219 $ 24,295
Realized gains 12,460 13,391 1,048
Realized losses (2,998) (4,202) (2,569)
Total investment income $ 37,735 $ 30,408 $ 22,774
Interest Expense
Interest expense consists of interest on the Company's capital lease commitments and 0.75% convertible senior notes (the "Notes"). As described in
Note 2, in accounting for the Notes at the time of issuance in January 2010, the carrying amount of the liability component was calculated by measuring the
fair value of a similar liability that did not have an associated convertible feature. The excess of the principal amount of the liability component over its
carrying amount ("debt discount") is amortized, using an effective interest rate of 5.86%, to interest expense over the term of the Notes.
Property and Equipment
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 years
Leasehold improvements Shorter of the estimated useful life or the lease term
Buildings and improvements Amortized over the estimated useful lives of the respective assets when they are
ready for their intended use.
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.
Capitalized Interest Cost
Interest costs related to major construction projects, specifically the Company's campus project and capitalized internal-use software development costs,
are capitalized until the underlying asset is placed into service. Capitalized interest is calculated by multiplying the effective interest rate of the Notes by the
qualifying costs. As the qualifying asset is placed into service, the qualifying asset and the related capitalized interest are amortized over the useful life of the
related asset. Interest costs of $3.7 million related to the buildings and improvements and $0.3 million related to the Company's capitalized internal-use
software development efforts were capitalized in fiscal 2011. No interest costs were capitalized in fiscal 2010.
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