TeleNav 2013 Annual Report Download - page 84

Table of Contents
TELENAV, INC.
Notes to Consolidated Financial Statements—(Continued)
compensation expense for the fair value of these awards with time-based vesting on a straight-line basis over the employee’s requisite service period
of each of these awards, net of estimated forfeitures.
Equity instruments issued to nonemployees are recorded at their fair value on the measurement date and are subject to periodic adjustment as
the underlying equity instruments vest.
Income taxes
We utilize the asset and liability method of accounting for income taxes, whereby deferred tax asset or liability account balances are calculated
at the balance sheet date using current tax laws and rates in effect for the year in which the differences are expected to affect taxable income.
Valuation allowances are provided when necessary to reduce deferred tax assets to the amount that will more likely than not be realized.
Research and software development costs
We expense research and development costs as incurred. 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. We capitalized $0.9 million , $2.4 million
and $1.2 million of software development costs during fiscal 2013 , 2012 and 2011 , respectively. Amortization expense related to these costs, which
has been recorded in cost of revenue, totaled $2.1 million , $1.8 million and $2.0 million for fiscal 2013 , 2012 and 2011 , respectively. In addition,
we wrote off $112,000 and $714,000 of capitalized software development costs in fiscal 2013 and 2011 due to impairment. As of June 30, 2013 and
2012 , unamortized capitalized software development costs, which were included in other assets, were $1.1 million and $2.4 million , respectively.
We also account for the costs of computer software we develop for customers requiring significant modification or customization by deferring
qualifying costs under the completed contract method. All such development costs incurred are deferred until the related revenue is recognized. We
deferred $1.3 million , $2.4 million and $2.1 million of software development costs during fiscal 2013 , 2012 and 2011 , respectively. Development
costs expensed to cost of revenue totaled $4.9 million , $0.4 million and $1.8 million fiscal 2013 , 2012 and 2011 , respectively. As of June 30, 2013
and 2012 , deferred capitalized software development costs, which were included primarily in prepaid expenses and other current assets, were $0.5
million and $4.3 million , respectively.
Advertising expense
Advertising costs are expensed as incurred. Advertising expense was $3.1 million , $927,000 and $526,000 in fiscal 2013 , 2012 and 2011 ,
respectively.
Recent accounting pronouncements
In June 2011, the Financial Accounting Standards Board, or FASB, issued amended guidance to require an entity to present total
comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of
comprehensive income or in two separate but consecutive statements. The amended guidance eliminates the option to present the components of
other comprehensive income as part of the statement of equity. We adopted this amendment retrospectively during the three months ended September
30, 2012, electing to present the required information in two separate but consecutive statements. The adoption of this guidance affected financial
statement presentation only and did not otherwise have a material effect on our consolidated financial statements.
In September 2011, the FASB issued a revised standard for testing goodwill for impairment. The revised standard is intended to reduce the cost
and complexity of the annual goodwill impairment test by providing entities an option to perform a “qualitative” assessment to determine whether
further impairment testing is necessary. We adopted this standard during the three months ended September 30, 2012. The adoption of this standard
did not have a material effect on our consolidated financial statements.
In July 2012, the FASB issued amended guidance to simplify the testing of indefinite-lived intangible assets other than goodwill for
impairment. The amendment becomes effective for annual and interim impairment tests performed for fiscal years beginning on or after
September 15, 2012 and earlier adoption is permitted. The adoption of this guidance is not expected to have a material effect on our consolidated
financial statements.
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