8x8 2000 Annual Report Download - page 43

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8X8, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
At March 31, 1999, the Company classified $14.1 million of its investments, primarily consisting of money market funds with an effective
maturity of three months or less, as available-for-sale. Investments classified as available-for-sale are reported at fair value with unrealized
gains and losses, net of related tax, if any, recorded as a separate component of stockholders' equity. Unrealized losses on available-for-sale
investments were $193,000 at March 31, 1999. Realized losses on investments classified as available for sale were approximately $205,000
during the year ended March 31, 2000. Realized and unrealized gains and losses for all other investments were not significant for the years
ended March 31, 2000, 1999 and 1998.
INVENTORY
Inventory is stated at the lower of standard cost, which approximates actual cost using the first-in, first-out method, or market.
NONMARKETABLE EQUITY INVESTMENTS
Nonmarketable equity investments, included in other assets, of less than 20% of the investee's outstanding voting stock are accounted for using
the cost method because the Company does not have an ability to significantly influence the operating and financial policies of the investees.
losses occur. The Company realized a gain of approximately $1.9 million on the sale of a nonmarketable equity investment during the fiscal
year ended March 31, 2000.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation and amortization are computed using
the straight-line method, based upon the shorter of the estimated useful lives, ranging from three to five years, or the lease term of the
respective assets as follows:
GOODWILL AND OTHER INTANGIBLES
Goodwill and other intangibles acquired in connection with the acquisition of Odisei S.A. ("Odisei") in May 1999 were approximately $3.7
million, and related accumulated amortization was $614,000 at March 31, 2000 (see Note 3). The acquisition was accounted for as a purchase,
and the excess of the purchase price over the fair value of net liabilities acquired was allocated primarily to workforce and goodwill, which are
being amortized over lives of three and five years, respectively. The Company reviews the carrying value of goodwill and other intangible
assets whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.
WARRANTY EXPENSE
The Company accrues for the estimated cost which may be incurred under its product warranties upon revenue recognition.
RESEARCH AND SOFTWARE DEVELOPMENT COSTS
Research and development costs are charged to operations as incurred. Software development costs incurred prior to the establishment of
technological feasibility are included in research and development and
39
Machinery and computer equipment......... 3 years
Furniture and fixtures................... 5 years
Licensed software........................ 3 years
Leasehold improvements................... Shorter of lease term or useful life of
the asset