8x8 2014 Annual Report Download - page 66

DEFERRED RENT
In April 2012, the Company entered into an 87-month lease agreement for its new headquarters. Under the terms of the lease agreement:
4 the Company received a three month rent holiday from rental payments;
4 base rent is $130,821 for the 15 months after the rent holiday; and
4 rent expense increases 3% each year thereafter.
In the second quarter of fiscal 2013, the Company received a $1.7 million allowance for reimbursement for the cost of tenant improvements that
the Company included in cash flows from operating activities. In accordance with the guidance in ASC 840-20, Leases, the Company accounts
for its headquarters facility operating lease as follows:
Rent Holidays.
The Company recognizes the related rent expense on a straight-line basis at the earlier of the first rent payment or the date of
possession of the leased property. The difference between the amounts charged to expense and the rent paid is recorded as deferred lease
incentives and amortized over the lease term.
Rent Escalations.
The Company recognizes escalating rent provisions on a straight-line basis over the lease term. The difference between the
amounts charged to expense and the rent paid is recorded as deferred lease incentives and amortized over the lease term.
Tenant Improvement Allowance . The tenant improvement allowance is deferred and amortized on a straight-line basis over the life of the lease
as a reduction to rent expense.
At March 31, 2014, total deferred rent included in other accrued liabilities and non-current liabilities was $0.2 million and $1.6 million,
respectively. At March 31, 2013, total deferred rent included in other accrued liabilities and non-current liabilities was $0.2 million and $1.8
million, respectively.
RECENT ACCOUNTING PRONOUNCEMENTS
In July 2013, the FASB issued ASU No. 2013-11, "Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit when a Net
Operating Loss Carryforward, a Similar Tax Loss, or a Tax credit Carryforward Exist ("ASU 2013-11"). ASU 2013-11 provides guidance on
the financial statement presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit
carryforward exists. The guidance requires an unrecognized tax benefit, or a portion of an unrecognized tax benefit, to be presented in the
financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward,
except in certain situations. ASU 2013-11 will be effective for the fiscal years, and interim periods within those years, beginning after December
15, 2013, with early adoption permitted. The Company does not believe that the adoption of ASU 2013-11 will have a material impact on the
Company's consolidated results of operation and financial condition.
In April 2014, The FASB has issued Accounting Standards Update (ASU) No. 2014-
08, "Presentation of Financial Statements" (Topic 205) and
"Property, Plant, and Equipment: Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity" (Topic
360). The amendments in the ASU change the criteria for reporting discontinued operations while enhancing disclosures in this area. It also
addresses sources of confusion and inconsistent application related to financial reporting of discontinued operations guidance in U.S. GAAP.
The amendments in the ASU are effective in the first quarter of 2015 for public organizations with calendar year ends. The Company does not
believe that the adoption of ASU 2014-
08 will have a material impact on the Company's consolidated results of operation and financial
condition.
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