8x8 2008 Annual Report Download - page 53

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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 current replacement cost or market is below the carrying
value due to 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, 2008 and 2007 was comprised of the following:
2008 2007
Work-in-process $ 1,095 $ 1,919
Finished goods 444 710
$ 1,539 $ 2,629
(in thousands)
March 31,
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, 2008 and 2007 was
comprised of the following:
2008 2007
Machinery and computer equipmen
t
$ 3,884 $ 3,941
Furniture and fixtures 167 167
Licensed software 1,547 1,709
Leasehold improvements 300 281
5,898 6,098
Less: accumulated depreciation and amortization (3,888) (3,258)
$ 2,010 $ 2,840
March 31,
(in thousands)
Maintenance, repairs and ordinary replacements are charged to expense. Expenditures for improvements that extend the
physical or economic life of the property are capitalized. Gains or losses on the disposition of property and equipment are
recorded in the loss from operations.
IMPAIRMENT OF LONG-LIVED ASSETS
8x8 reviews the recoverability of its long-lived assets, such as plant and equipment, when events or changes in circumstances
occur that indicate that the carrying value of the asset or asset group may not be recoverable. The assessment of possible
impairment is based on the Company’ s ability to recover the carrying value of the asset or asset group from the expected future
pre-tax cash flows (undiscounted and without interest charges) of the related operations. If these cash flows are less than the
carrying value of such asset, an impairment loss is recognized for the difference between estimated fair value and carrying
value. The measurement of impairment requires management to estimate future cash flows and the fair value of long-lived
assets.
WARRANTY EXPENSE
The Company accrues for estimated product warranty cost upon revenue recognition. Accruals for product warranties are
calculated based on the Company’ s historical warranty experience adjusted for any specific requirements.
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