Support.com 2009 Annual Report Download - page 57

Table of Contents
SUPPORT.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Income Taxes
Income taxes are accounted for under the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the estimated
future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax
bases, and operating losses and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which
those temporary differences are expected to be reversed or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the
consolidated statements of operations in the period that includes the enactment date. A valuation allowance is recorded to reduce the carrying amounts of
deferred tax assets, if it is more likely than not, that such assets will not be realized.
Warranties and Indemnifications
We generally provide a refund period on sales, during which refunds may be granted to consumers under certain circumstances, including our inability to
resolve certain support issues. For our channel sales, the refund period varies by channel partner, but is generally between 5-10 days. For referral programs and
direct transactions, the refund period is generally 5 days. For all sales channels, we recognize revenue net of refunds and cancellations during the period. Refunds
and cancellations have not been material to date.
We generally agree to indemnify our customers against legal claims that our software products infringe certain third-party intellectual property rights and
account for our indemnification obligations. As of December 31, 2009 and 2008 we have not been required to make any payment resulting from infringement
claims asserted against our customers and have not recorded any related accruals.
Fair Value Measurements
Effective January 1, 2008, we adopted ASC 820, Fair Value Measurements and Disclosures, which defines fair value, establishes a framework for
measuring fair value under generally accepted accounting principles and enhances disclosures about fair value measurements. Fair value is defined under ASC
820 as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the
asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value ASC 820 must
maximize the use of observable inputs and minimize the use of unobservable inputs. The standard describes a fair value hierarchy based on three levels of inputs,
of which the first two are considered observable and the last unobservable, that may be used to measure fair value, which are the following:
• Level 1—Quoted prices in active markets for identical assets or liabilities.
• Level 2—Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted
prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full
term of the assets or liabilities.
• Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
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Source: Support.com, Inc., 10-K, March 12, 2010 Powered by Morningstar® Document Research℠