Support.com 2007 Annual Report Download - page 49

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on items for which the fair value option has been elected be reported in earnings. SFAS No. 159 is effective for the Company beginning in the first quarter of
fiscal year 2008, although earlier adoption is permitted. The Company is currently evaluating the impact of adopting SFAS No. 159 on its consolidated financial
statements.
In December 2007 the FASB issued SFAS No. 141 (revised 2007), "Business Combinations." SFAS No. 141R will significantly change the accounting for
business combinations in a number of areas, including the measurement of assets and liabilities acquired and the treatment of contingent consideration,
contingencies, acquisition costs, in-process research and development and restructuring costs. In addition, under SFAS No. 141R, changes in deferred tax asset
valuation allowances and acquired income tax uncertainties in a business combination after the measurement period will affect the income tax provision. SFAS
No. 141R is effective for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning after
December 15, 2008, which means that it will be effective for our fiscal year beginning January 1, 2009. Early adoption is prohibited. The Company is currently
evaluating the impact of adopting SFAS No. 141 on its consolidated financial statements.
In December 2007 the FASB issued SFAS No. 160, "Noncontrolling Interests in Consolidated Financial Statements," which establishes accounting and
reporting standards for the noncontrolling (minority) interest in a subsidiary and for the deconsolidation of a subsidiary. SFAS No. 160 is effective for business
arrangements entered into in fiscal years beginning on or after December 15, 2008, which means that it will be effective for our fiscal year beginning January 1,
2009. Early adoption is prohibited. The Company is currently evaluating the impact of adopting SFAS No. 141 on its consolidated financial statements.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Our financial results could be affected by factors such as changes in foreign currency exchange rates or weak economic conditions in foreign markets. As
most sales are currently made in U.S. dollars, a strengthening of the dollar could make our products less competitive in foreign markets.
Interest Rate and Market Risk
The primary objective of our investment activities is to preserve principal while at the same time maximizing the income we receive from our investments
without significantly increasing risk. To achieve this objective, we invest our excess cash in a variety of securities, including government debt securities,
municipal debt securities with an auction reset feature ("auction-rate securities"), corporate notes and bonds, commercial paper and money market funds meeting
certain criteria. These securities are classified as available-for-sale and consequently are recorded on the balance sheet at fair value with unrealized gains or
losses reported as a separate component of accumulated other comprehensive income (loss). Our holdings of the securities of any one issuer, except government
agencies, do not exceed 10% of the portfolio. We do not utilize derivative financial instruments to manage our interest rate risks.
As of December 31, 2007, we held $100 million in marketable securities (excluding cash and cash equivalents), which consisted primarily of government
debt securities, auction-rate securities, corporate notes and bonds, and commercial paper. The weighted average interest rate of our portfolio was approximately
4.18% at December 31, 2007. A decline in interest rates over time would reduce our interest income from our marketable securities. A decrease in interest rates
of 100 basis points would cause a corresponding decrease in our annual interest income of approximately $1.0 million.
At March 11, 2008 and December 31, 2007 we had investments in AAA-rated auction-rate debt securities with various state student loan authorities of
$25.3 million and $38.9 million, respectively. At the time of our initial investment and through the date of this Report, all of the securities we have
45
Source: SUPPORTSOFT INC, 10-K, March 13, 2008