TiVo 2008 Annual Report Download - page 65

Table of Contents
TIVO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF OPERATIONS
TiVo Inc. (together with its subsidiaries the Company or TiVo) was incorporated in August 1997 as a Delaware corporation and is located in Alviso,
California. TiVo is a provider of technology and services for digital video recorders (DVRs). The subscription-based TiVo® service (TiVo service) improves
home entertainment by providing consumers with an easy way to record, watch, and control television. TiVo also provides a unique advertising platform and
audience research measurement services. The Company conducts its operations through one reportable segment.
The Company is subject to a number of risks, including delays in product and service developments; competitive service offerings; lack of market
acceptance; uncertainty of future profitability; the dependence on third parties for manufacturing, marketing, and sales support; the intellectual property
claims against the Company; and dependence on its relationships with third party service providers such as Comcast and in the future DIRECTV and Cox for
subscription growth. The Company anticipates that its business will continue to be seasonal and expects to generate a significant portion of its new
subscriptions during and immediately after the holiday shopping season. However, as a result of the recent national and global economic downturn and overall
consumer spending we are cautious about our subscription growth in the near term.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All inter-company accounts and
transactions have been eliminated in consolidation.
During the year ended January 31, 2009, the Company determined that it had cumulatively under accrued royalty expense of approximately $0.7
million during the period of fiscal year 2004 through fiscal year 2008 and that it had cumulatively under accrued approximately $1.8 million in fiscal year
2003 through fiscal year 2007 related to non-income based taxes for those years. Management concluded that these errors were immaterial to the fiscal years
2003 through 2008 consolidated financial statements, but that its correction in the current year would be material. Accordingly, pursuant to Staff Accounting
Bulletin No. 108 (SAB 108), "Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements,"
the consolidated balance sheet as of January 31, 2008 has been revised to reflect the increase of $2.5 million in accrued liabilities with a corresponding
increase in accumulated deficit. Statements of operations for fiscal years 2007 and 2008 have been adjusted to reflect increase in cost of hardware revenues by
$134,000 in fiscal 2008 and $293,000 in fiscal 2007 and an increase of general and administrative expenses by $1.0 million in fiscal 2007.
Use of Estimates and Uncertainties
The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and accompanying notes. The estimates and judgments affect the reported amounts of
assets, liabilities, revenues and expenses, and related disclosure of contingent liabilities. On an on-going basis, the Company evaluates its estimates, including
those related to estimated lives of product lifetime subscriptions, customer programs and incentives, product returns, inventories and related reserves,
warranty obligations, contingencies, stock compensation, assessment of other-than-temporary impairment of investments, and litigation. The Company bases
estimates on historical experience and on other assumptions that its management believes are reasonable under the circumstances. Illiquid credit markets and
declines in consumer spending have combined to increase the uncertainty inherent in such estimates and assumptions. As future events and their effects
cannot be determined with precision, actual results could differ significantly from these estimates. Changes in those estimates resulting from continuing
changes in the economic environment will be reflected in the financial statements in future periods and actual results could differ from these estimates.
Cash and Cash Equivalents
The Company considers investments with a maturity of three months or less when purchased to be cash equivalents. The majority of payments due
from banks for third-party credit card, debit card and electronic benefit transactions ("EBT") process within 24-72 hours, except for transactions occurring on
a Friday, which are generally processed the following Monday. All credit card, debit card and EBT transactions that process in less than three days are
classified as cash and cash equivalents. Amounts due from banks for these transactions classified as cash totaled $1.8 million and $1.3 million at January 31,
2009 and 2008, respectively.
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