TiVo 2008 Annual Report Download - page 30

Table of Contents
generated from activities in those states. The laws and regulations governing the collection of sales tax and payment of income taxes are numerous, complex,
and vary between states. If we fail to comply with these laws and regulations requiring the collection of sales tax and payment of income taxes in one or more
states where we do business, we could be subject to significant costs, expenses, penalties, and fees in which case our business could be harmed.
Compliance with federal securities laws and regulations is costly.
The federal securities laws and regulations, including the corporate governance and other requirements of the Sarbanes-Oxley Act of 2002 impose
complex and continually changing regulatory requirements on our operations and reporting. These requirements impose comprehensive reporting and
disclosure requirements, set stricter independence and financial expertise standards for audit committee members, and impose civil and criminal penalties for
companies, their chief executive officers, chief financial officers and directors for securities law violations. These requirements have increased and will
continue to increase our legal compliance costs, increase the difficulty and expense in obtaining director and officer liability insurance, and make it harder for
us to attract and retain qualified members of our Board of Directors and/or qualified executive officers. Such developments could harm our results of
operations and divert management's attention from business operations.
Our business could be adversely impacted if we have deficiencies in our disclosure controls and procedures or internal control over financial
reporting.
The design and effectiveness of our disclosure controls and procedures and internal control over financial reporting may not prevent all errors,
misstatements or misrepresentations. While management continues to review the effectiveness of our disclosure controls and procedures and internal control
over financial reporting, we can not assure you that our disclosure controls and procedures and internal control over financial reporting will be effective in
accomplishing all control objectives all of the time. Deficiencies, particularly a material weakness in internal control over financial reporting, which may
occur in the future could result in misstatements of our results of operations, restatements of our financial statements, a decline in our stock price, the delisting
of our common stock from the Nasdaq Global Market, or otherwise materially adversely affect our business, reputation, results of operation, financial
condition or liquidity.
The nature of our business requires the application of complex revenue and expense recognition rules and the current legislative and
regulatory environment affecting U.S. Generally Accepted Accounting Principles (GAAP) is uncertain and volatile, and significant changes in
current principles could affect our financial statements going forward.
The accounting rules and regulations that we must comply with are complex and continually changing. Recent actions and public comments from the
Securities Exchange Commission have focused on the integrity of financial reporting generally. In addition, many companies' accounting policies are being
subject to heightened scrutiny by regulators and the public. While we believe that our financial statements have been prepared in accordance with accounting
principles generally accepted in the United States of America, we cannot predict the impact of future changes to accounting principles or our accounting
policies on our financial statements going forward. In addition, were we to change our critical accounting estimates, including the timing of recognition of
revenue from our product lifetime subscriptions, our results of operations could be significantly impacted.
Negative conditions in the global credit markets may impair the liquidity of a portion of our investment portfolio.
Our long-term investment securities represent approximately 3% of our total cash, cash equivalent, short-term and long-term investments. These
investment securities consist of investment-grade auction rate securities. As of March 23, 2009, our long-term investments included approximately $5.0
million of investment-grade auction rate securities issued by education finance companies, on which we have recorded unrealized losses of approximately
$1.1 million as of January 31, 2009. Our auction rate securities are debt instruments with a long-term maturity and an interest rate that is reset in short
intervals through auctions. The recent conditions in the global credit markets have prevented us from liquidating our holdings of auction rate securities
because the amount of securities submitted for sale has exceeded the amount of purchase orders for such securities. If there is insufficient demand for the
securities at the time of an auction, the auction may not be completed and the interest rates may be reset to predetermined higher rates. Although to date, we
have not recorded any realized gains or losses on our investment portfolio, when auctions for these securities fail, the investments may not be readily
convertible to cash until a future auction of these investments is successful or they are redeemed or mature. If the financial health of the security issuers
deteriorate and any decline in market value is determined to be other-than-temporary, we would be required to adjust the carrying value of the investment
through an impairment charge.
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