Support.com 2006 Annual Report Download - page 55

SUPPORTSOFT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Note 1. Organization and Summary of Significant Accounting Policies (Continued)
We assess the impairment of goodwill annually or more often if events or changes in circumstances indicate that the carrying value
may not be recoverable. An impairment loss would be recognized when the sum of the discounted future net cash flows expected to
result from the use of the asset and its eventual disposition is less than its carrying amount. Such impairment loss would be measured
as the difference between the carrying amount of the asset and its fair value. The estimate of cash flows is based upon, among other
things, certain assumptions about expected future operating performance and an appropriate discount rate determined by our
management. Our estimates of discounted cash flows may differ from actual cash flows due to, among other things, economic
conditions, changes to the business model or changes in operating performance. If we made different estimates, material differences
may result in write−down of net long−lived and intangible assets, which would be reflected by charges to our operating results for any
period presented. At September 30, 2006, we concluded our annual evaluation for impairment of goodwill and no impairment was
recognized. We will continue to test for impairment during the third quarter of each year, or earlier if indicators of impairment exist.
Intangible Assets
The Company records purchased intangible assets at fair value. The original cost is amortized on a straight−line basis over the
estimated useful life of each asset. We assess the impairment of intangible assets whenever events or changes in circumstances
indicate that its carrying amount may not be recoverable. We perform an annual review to determine if the carrying value of the
intangible asset is impaired, unless events or circumstances indicate a potential impairment exists in which case a review is performed
more often. The review considers facts and circumstance, either internal or external, which indicate that the carrying value of the asset
cannot be recovered. If and when indicators of impairment exist, SupportSoft assesses the need to record an impairment loss, by
comparing the undiscounted net cash flows associated with related assets or group of assets over their remaining lives against their
respective carrying amounts. Impairment, if any, is based on the excess of the carrying amount over the fair value of those assets.
As of December 31, 2006, intangible assets, in the amount of $2.9 million, net of amortization, consist of customer relationships,
developed and core technology, which are amortized over an estimated useful lives of 5 years. Included in intangible assets, in the
aggregate amount of $250,000, is the cost of obtaining a toll−free telephone number which does not have a finite useful life.
Revenue Recognition
We recognize revenue in accordance with the American Institute of Certified Public Accountants’ (AICPA) Statement of Position
(“SOP”) 97−2, Software Revenue Recognition, as amended by SOP 98−4 and SOP 98−9. License revenue is recognized when all of
the following criteria are met:
• Persuasive evidence of an arrangement exists;
• Delivery has occurred;
• Collection is considered probable; and
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Source: SUPPORTSOFT INC, 10−K, March 16, 2007