8x8 2007 Annual Report Download - page 58

RECENT ACCOUNTING PRONOUNCEMENTS
In March 2006, the Emerging Issues Task Force reached a consensus on Issue No. 06-03 “How Taxes Collected from
Customers and Remitted to Government Authorities Should Be Presented in the Income Statement (That Is, Gross versus Net
Presentation)” (“EITF No. 06-03”). We are required to adopt the provisions of EITF No. 06-03 in the first quarter of fiscal
2008. We currently report revenue net of taxes collected and remitted to governmental authorities. We do not expect the
adoption of the provisions of EITF No. 06-03 in the first quarter of fiscal 2008 to have a material impact on our results of
operations and financial condition.
In July 2006, FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes: an Interpretation of
FASB Statement No. 109” (FIN 48), which clarifies the accounting for uncertainty in income taxes recognized in an
enterprise’s financial statements. This Interpretation requires that we recognize in our financial statements the impact of a tax
position if that position is more likely than not of being sustained on audit, based on the technical merits of the position. We
expect to adopt FIN 48 in the first quarter of fiscal 2008, with the cumulative effect, if any, of the change in accounting
principle recorded as an adjustment to our opening retained earnings. We are in the process of evaluating the effect of FIN 48
on our results of operations and financial condition.
In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements. SFAS No. 157 defines fair value, establishes a
framework for measuring fair value in generally accepted accounting principles (GAAP) and expands disclosures about fair
value measurements. SFAS No. 157 applies to other accounting pronouncements that require or permit fair value
measurements, but does not require any new fair value measurements. SFAS No. 157 is effective for financial statements
issued for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. Early application is
encouraged, provided that the reporting entity has not yet issued financial statements for an interim period within that fiscal
year. We do not expect the adoption of SFAS No. 157 will have a material impact on our results of operations and financial
condition.
In September 2006, the SEC issued Staff Accounting Bulletin (“SAB”) No. 108, “Considering the Effects of Prior Year
Misstatements when Quantifying Misstatements in Current Year Financial Statement.” SAB 108 was issued in order to
eliminate the diversity of practice surrounding how public companies quantify financial statement misstatements. There are
two error evaluation techniques most commonly used for quantifying the effects of financial statement misstatements: the “roll-
over” and “iron curtain” methods. The roll-over method focuses primarily on the impact of the misstatement on the statement
of operations and ignores the reversal of the carryover effects of prior year misstatements. Because the focus is on the
statement of operations, the roll-over method can lead to accumulation of misstatements on the balance sheet that may be
immaterial to the balance sheet but correction in a single period could be material to the statement of operations. The iron
curtain method focuses primarily on the effect of correcting the accumulated balance as of the balance sheet date, essentially
correcting the balance sheet with less emphasis on reversal of the carryover effects of prior year errors on the statement of
operations. In SAB 108, the SEC staff established an approach that requires quantification of financial statement misstatements
based on the effects of the misstatements under both the iron curtain and roll-over method and is referred to as a “dual
approach.” SAB 108 permits a company to initially apply its provisions either by restating prior financial statements as if the
dual approach had always been used or recording the cumulative effect of initially applying the dual approach as adjustments
to the balance sheet. SAB No. 108 is effective for fiscal years ending after November 15, 2006, with early application for the
first interim period ending after November 15, 2006. The Company adopted SAB No. 108 in the third quarter of fiscal year
2007 and such adoption did not have any effect on the consolidated financial statements.
In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities”
(“SFAS No. 159”) which permits entities to choose to measure many financial instruments and certain other items at fair value
that are not currently required to be measured at fair value. SFAS No. 159 is effective for financial statements issued for fiscal
years beginning after November 15, 2007 and interim periods within those fiscal years. Early application is permitted provided
that the reporting entity also elects to apply SFAS No. 157, Fair Value Measurements. We are in the process of evaluating the
effect of SFAS 159 on our results of operations and financial condition.
COMPREHENSIVE LOSS
Comprehensive loss, as defined, includes all changes in equity (net assets) during a period from non-owner sources. The
difference between net loss and comprehensive loss is due to unrealized losses on investments classified as available-for-sale.
Comprehensive loss is reflected in the consolidated statements of stockholders' equity.
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