TeleNav 2013 Annual Report Download - page 83

Table of Contents
TELENAV, INC.
Notes to Consolidated Financial Statements—(Continued)
As of June 30, 2013 and 2012 , we did not have any Level 3 financial instruments.
Property and equipment
Property and equipment are stated at cost, less accumulated depreciation and amortization. Depreciation is computed using the straight-line
method over the estimated useful lives of the respective assets. Computers, automobiles and equipment have useful lives of three years and fixtures
and furniture have useful lives of five years. Leasehold improvements are amortized using the straight-line method over the shorter of the estimated
useful lives of the assets or the term of the related lease.
Long-term investments
Our long-term investments consist of non-marketable equity investments, and are included in other assets in our consolidated balance sheets.
We account for non-marketable equity investments for which we do not have control or the ability to exercise significant influence over the
investee under the cost method. We record realized gains or losses on the sale or impairment of cost method investments in other income (expense),
net. We recorded impairment charges of $335,000 and $250,000 on non-marketable equity investments in fiscal 2013 and 2012, respectively.
Long-lived assets
We evaluate our long-lived assets, including intangible assets, for impairment whenever events or changes in circumstances indicate the
carrying amount of an asset may not be recoverable. Recoverability of these assets is measured by a comparison of the carrying amounts to the future
undiscounted cash flows the assets are expected to generate. If long-lived assets are considered to be impaired, the impairment to be recognized
equals the amount by which the carrying value of the asset exceeds its fair value.
Goodwill
Goodwill represents the excess of the aggregate purchase price paid over the fair value of the net assets acquired. Goodwill is not amortized and
is tested for impairment at least annually or whenever events or changes in circumstances indicate that the carrying value may not be recoverable.
These tests are based on our single operating segment and reporting unit structure. We first assess qualitative factors to determine whether it is
necessary to perform the two-step quantitative goodwill impairment test. We are not required to calculate the fair value of our reporting unit unless
we determine, based on a qualitative assessment, that it is more-likely-than-not that the fair value is less than our carrying amount. If we determine it
is more likely than not that the fair value of the reporting unit is less than its carrying value, we perform a two-step quantitative goodwill impairment
test. The first step of the impairment test involves comparing the fair value of the reporting unit to its net book value, including goodwill. If the net
book value exceeds its fair value, then we would perform the second step of the goodwill impairment test to determine the amount of the impairment
loss, if any. In assessing the fair value of our reporting unit, we make assumptions regarding our estimated future cash flows, including estimated
growth rates. If our estimates or related assumptions change in the future, or if our net book value were to exceed our market capitalization, we may
be required to record impairment loss related to our goodwill. We have not recognized any impairment of goodwill in the three year period ended
June 30, 2013. As of June 30, 2013, we had goodwill of $14.4 million .
Leases
We lease our office facilities under operating lease agreements. Office facilities subject to an operating lease and the related lease payments are
not recorded on our balance sheet. The terms of certain lease agreements provide for rental payments on a graduated basis; however, we recognize
rent expense on a straight-line basis over the lease period in accordance with authoritative accounting guidance. Any lease incentives or contracted
sublease income are recognized as reductions of rental expense on a straight-line basis over the term of the lease. The lease term begins on the date
we become legally obligated for the rent payments or when we take possession of the office space, whichever is earlier. As of June 30, 2013 and
2012 , we had a total of $9.7 million and $9.3 million , respectively, in deferred rent related to tenant improvement lease incentives and graduated
rent payments recorded as liabilities on our balance sheets.
Stock-based compensation
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
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