8x8 2011 Annual Report Download - page 48

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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, 2011 and 2010 was comprised of the following:
2011 2010
Work-in-process $ 1,510 $ 1,701
Finished goods 595 473
$ 2,105 $ 2,174
March 31,
(in thousands)
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, 2011 and 2010 was
comprised of the following:
2011 2010
Machinery and computer equipmen
t
$ 5,817 $ 4,619
Furniture and fixtures 251 261
Licensed software 1,915 1,935
Leasehold improvements 262 253
8,245 7,068
Less: accumulated depreciation and amortizatio
n
(5,847) (5,197)
$ 2,398 $ 1,871
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.
GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill and intangible assets with indefinite useful lives are not amortized. Intangible assets with finite useful lives are
amortized on a straight-line basis over the periods benefited.
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.
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