8x8 2004 Annual Report Download - page 48

45
recognizes royalties upon notification of sale by its licensees. Revenue from consulting, training, and development
services is recognized as the services are performed.
CASH, CASH EQUIVALENTS, AND SHORT-TERM INVESTMENTS
The Company considers all highly liquid investments with an original maturity of three months or less to be cash
equivalents. Management determines the appropriate classification of debt and equity securities at the time of
purchase and reevaluates the classification at each reporting date. The cost of the Company's investments is
determined based upon specific identification.
Investments classified as available-for-sale are reported at fair value, based upon quoted market prices, with
unrealized gains and losses, net of related tax, if any, included in Accumulated Other Comprehensive Loss in the
Consolidated Balance Sheet. At March 31, 2004 and 2003, there were no investments classified as available-for-
sale.
Investments classified as trading securities are carried at fair value, with unrealized holding gains and losses
included in earnings. Realized gains and losses are determined using the specific identification method based on the
trade date of a transaction. The Company had $208,000 of investments classified as trading securities at March 31,
2003, and no investments classified as trading securities at March 31, 2004.
RESTRICTED CASH
Restricted cash represents amounts held in certificates of deposit to support stand-by letters of credit used as security
for third party vendors.
INVENTORY
Inventory is stated at the lower of standard cost, which approximates actual cost using the first-in, first-out method,
or market. Inventory reserves are established when conditions indicate that the selling price could be less than cost
due to physical deterioration, obsolescence, changes in price levels, or other causes. Reserves are established for
excess inventory generally based on inventory levels in excess of demand, as determined by management, for each
specific product Inventory at March 31, 2004 and 2003 was comprised of the following:
March 31,
2004 2003
(in thousands)
Raw materials and work-in-process..........................................................
.
$57$147
Finished goods............................................................................................
.
41 205
$98$352
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. Estimated useful lives of three years are used for
equipment and software and five years for furniture and fixtures. Amortization of leasehold improvements is
computed using the shorter of the remaining facility lease term or the estimated useful life of the improvements.
Property and equipment at March 31, 2004 and 2003, was comprised of the following components:
March 31,
2004 2003
(in thousands)
Machinery and computer equipment........................................................ $ 4,233 $ 7,378
Furniture and fixtures..................................................................................
.
693 847
Licensed software........................................................................................ 2,613 4,142
Leasehold improvements............................................................................ 903 914
8,442 13,281
Less: accumulated depreciation and amortization....................................
.
(8,284) (12,440)
$158$841