8x8 2007 Annual Report Download - page 52

time of shipment. The Company defers recognition of revenue on sales to distributors, retailers, and resellers where the right of
return exists until products are resold to the end user and the trial period has expired.
License and other revenue
During fiscal 2007 and 2006, revenues from software and technology licensing and related arrangements were limited. The
Company recognizes revenue from license contracts when a non-cancelable, non-contingent license agreement has been
signed, the software product has been delivered, no uncertainties exist surrounding product acceptance, fees from the
agreement are fixed or determinable, and collection is probable. The Company uses the residual method to recognize revenue
when a license agreement includes one or more elements to be delivered at a future date if evidence of the fair value of all
undelivered elements exists. If evidence of the fair value of the undelivered elements does not exist, revenue is deferred and
recognized when delivery occurs. When the Company enters into a license agreement requiring that the Company provide
significant customization of the software products, the license and consulting revenue is recognized using contract accounting.
Revenue from maintenance agreements is recognized ratably over the term of the maintenance agreement, which in most
instances is one year. The Company 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 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 categorization of its investments 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.
The Company’s investments are comprised of federal agency and auction rate securities. At March 31, 2007 and 2006, all
investments were classified as available-for-sale and reported at fair value, based upon quoted market prices, with unrealized
gains and losses, net of related tax, if any, included in other comprehensive loss and disclosed as a separate component of
stockholders’ equity. Realized gains and losses on sales of all such investments are reported within the caption of other income,
net in the statements of operations and computed using the specific identification method. The Company’s investments in
marketable securities are monitored on a periodic basis for impairment. In the event that the carrying value of an investment
exceeds its fair value and the decline in value is determined to be other-than-temporary, an impairment charge is recorded and a
new cost basis for the investment is established.
Available-for-sale investments were (in thousands):
Gross
Amortized Unrealized Estimated
As of March 31, 2007 Costs Loss Fair Value
Money market funds $ 4,585 $ - $ 4,585
Commercial pape
r
499 - 499
Federal agency securities 2,500 (3) 2,497
Auction rate securities 2,700 - 2,700
Total available-for-sale investments $ 10,284 $ (3) $ 10,281
Reported as (in thousands):
Cash and cash equivalents $ 5,084
Short-term investments 5,197
Total $ 10,281
50