Support.com 2007 Annual Report Download - page 65

SUPPORTSOFT, INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 1. Organization and Summary of Significant Accounting Policies (Continued)
For the years ended December 31, 2007 and 2006, the outstanding options were excluded from the computation of diluted net loss per share since their
effect would have been anti-dilutive. For the year ended December 31, 2005, $6.9 million potential shares of common stock have been excluded from the
computation of diluted net income per share because their effect would have been anti-dilutive. These shares were anti-dilutive because their exercise price
exceeded the average market price during the year.
Accumulated Other Comprehensive Loss
The components of accumulated other comprehensive loss relate entirely to accumulated foreign currency translation losses and unrealized losses on
available-for-sale securities. Accumulated currency translation losses were $793,000 and $697,000 as of December 31, 2007 and 2006, respectively, and
accumulated unrealized gains (losses) on available-for-sale securities were $21,000 and ($54,000) as of December 31, 2007 and 2006, respectively.
Stock-Based Compensation
On January 1, 2006, the Company adopted Statement of Financial Accounting Standards No. 123 (revised 2004), "Share-Based Payment," ("SFAS 123R")
which requires the measurement and recognition of compensation expense for all stock-based payment awards, including employee stock options and employee
stock purchases, made to employees and directors based on estimated fair values. Prior to January 1, 2006, the Company accounted for stock-based payments to
employees using the intrinsic value method under APB Opinion No. 25, as permitted by SFAS 123R, and, as such, generally recognized no compensation cost
for employee stock options or employees stock purchases in its financial statements.
SupportSoft elected the modified prospective transition method for adopting SFAS 123R which required the application of the accounting standard as of
January 1, 2006, the first day of the Company's 2006 fiscal year. Under this transition method, compensation cost includes the applicable amounts of:
(a) compensation cost for all stock-based payments granted prior to, but not yet vested, as of December 31, 2005 based on the grant-date fair value estimated in
accordance with the original provisions of SFAS 123 and previously presented in the pro-forma footnote disclosures, and (b) compensation cost of all
stock-based payments granted subsequent to January 1, 2006 based on the grant-date fair value estimated in accordance with the new provisions of SFAS 123R.
Prior periods have not been restated to reflect the impact of SFAS 123R.
Determining Fair Value
Valuation and Attribution Method: SupportSoft estimates the fair value of stock options granted generally using theBlack-Scholes option pricing model.
Stock options vest on a graded schedule; however the Company recognizes the expense on a straight-line basis over the requisite service period of the entire
award, net of estimated forfeitures and subject to the minimum expense requirements of SFAS 123R. These limitations require that on any date the compensation
cost recognized is at least equal to the portion of the grant-date fair value of the award that is vested at that date.
Risk-free Interest Rate: The Company bases its risk-free interest rate upon the yield currently available on US Treasury zero coupon issues for the expected
term of the employee stock options.
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Source: SUPPORTSOFT INC, 10-K, March 13, 2008