TeleNav 2010 Annual Report Download - page 55

In addition to our LBS, we offer mobile phone accessories and other related hardware products through our
website. We recognize revenue related to these products upon delivery, assuming all other revenue recognition
criteria have been met. Revenue from mobile phone accessories and other related hardware products represented
less than 2% of our revenue for fiscal 2008, 2009 and 2010, and we anticipate that this revenue will remain
immaterial for fiscal 2011.
Software development costs. We account for the costs of computer software we develop for internal use by
capitalizing qualifying costs, which are incurred during the application development stage, and amortizing those
costs over the application’s estimated useful life, which generally ranges from 18 to 24 months depending on the
type of application. Costs incurred and capitalized during the application development stage generally include the
costs of software configuration, coding, installation and testing. Such costs primarily include payroll and payroll
related expenses for employees directly involved in the application development, as well as third party developer
fees. We expense preliminary evaluation costs as they are incurred before the application development stage, as
well as post development implementation and operation costs, such as training, maintenance and minor upgrades.
We begin amortizing capitalized costs when a project is ready for its intended use, and we periodically reassess
the estimated useful life of a project considering the effects of obsolescence, technology, competition and other
economic factors which may result in a shorter remaining life.
We capitalized $438,000, $1.6 million and $2.4 million of software development costs during fiscal 2008,
2009 and 2010, respectively. Amortization expense related to these costs, which was recorded in cost of revenue,
totaled $279,000, $418,000 and $939,000 for fiscal 2008, 2009 and 2010, respectively.
Impairment of long-lived assets. We evaluate long-lived assets held and used for impairment whenever
events or changes in circumstances indicate that their net book value may not be recoverable. We continually
evaluate whether events and circumstances have occurred that indicate the balance of our property and equipment
and intangible assets with definite lives may not be recoverable. Our evaluation is significantly impacted by our
estimates and assumptions of future revenue, costs, and expenses and other factors. If an event occurs that would
cause us to revise our estimates and assumptions used in analyzing the value of our property and equipment, that
revision could result in a non-cash impairment charge that could have a material impact on our financial results.
When these factors and circumstances exist, we compare the projected undiscounted future cash flows associated
with the related asset or group of assets over their estimated useful lives against their respective carrying
amounts. We base the impairment, if any, on the excess of the carrying amount over the fair value, based on
market value when available, or discounted expected cash flows of those assets, and record it in the period in
which we make the determination.
Stock-based compensation expense. We account for stock-based employee compensation arrangements
under the fair value recognition method, which requires us to measure the stock-based compensation costs of
share-based compensation arrangements based on the grant date fair value, and recognize the costs in the
financial statements over the employees’ requisite service period. We recognize compensation expense for the
fair value of these awards with time based vesting on a straight-line basis over an employee’s requisite service
period of each of these awards, net of estimated forfeitures.
Our stock-based compensation expense was as follows:
Fiscal Year Ended June 30,
2010 2009 2008
(in thousands)
Cost of revenue ........................................ $ 18 $ 4 $ 2
Research and development ............................... 2,604 237 202
Selling and marketing ................................... 516 155 194
General and administrative .............................. 1,789 111 57
Total stock-based compensation expense ................... $4,927 $507 $455
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