8x8 2014 Annual Report Download - page 62

INCOME TAXES
Income taxes are accounted for using the asset and liability approach. Under the asset and liability approach, a current tax liability or asset is
recognized for the estimated taxes payable or refundable on tax returns for the current year. A deferred tax liability or asset is recognized for the
estimated future tax effects attributed to temporary differences and carryforwards. If necessary, the deferred tax assets are reduced by the amount
of benefits that, based on available evidence, is more likely than not expected to be realized.
CONCENTRATIONS
Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash and cash
equivalents, investments and trade accounts receivable. The Company has cash equivalents and investment policies that limit the amount of
credit exposure to any one financial institution and restrict placement of these funds to financial institutions evaluated as highly credit-worthy.
The Company has not experienced any material losses relating to its investment instruments.
The Company sells its products to business customers and distributors. The Company performs ongoing credit evaluations of its customers'
financial condition and generally does not require collateral from its customers. For the years ended March 31, 2014, 2013 and 2012, the
Company wrote-off accounts receivables for approximately $0.4 million, $0.5 million and $0.2 million, respectively. At March 31, 2014 and
2013, no customer accounted for more than 10% of accounts receivable.
The Company outsources the manufacturing of its hardware products to independent contract manufacturers. The inability of any contract
manufacturer to fulfill supply requirements of the Company could materially impact future operating results, financial position or cash flows. If
any of these contract manufacturers fail to perform on their obligations to the Company, such failure to fulfill supply requirements of the
Company could materially impact future operating results, financial position and cash flows.
The Company also relies primarily on third party network service providers to provide telephone numbers and PSTN call termination and
origination services for its customers. If these service providers failed to perform their obligations to the Company, such failure could materially
impact future operating results, financial position and cash flows.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair value of financial instruments is determined by the Company using available market information and valuation methodologies
considered to be appropriate. The carrying amounts of the Company's cash and cash equivalents, accounts receivable and accounts payable
approximate their fair values due to their short maturities. The Company's investments are carried at fair value.
ACCOUNTING FOR STOCK
-BASED COMPENSATION
The Company accounts for its employee stock options, stock purchase rights, restricted stock units and restricted performance stock units
granted under the 1996 Stock Plan, 1996 Director Option Plan, 1999 Nonstatutory Stock Option Plan, the 2006 Stock Plan, the 2003 Contactual
Plan, the 2012 Equity Incentive Plan, the 2013 New Employee Inducement Incentive Plan and stock purchase rights under the 1996 Employee
Stock Purchase Plan (collectively "Equity Compensation Plans") under the provisions of ASC 718 - Stock Compensation . Under the provisions
of ASC 718, stock-
based compensation cost is measured at the grant date, based on the estimated fair value of the award, and is recognized as an
expense over the employee's requisite service period (generally the vesting period of the equity grant), net of estimated forfeitures.
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