8x8 2016 Annual Report Download - page 63

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The Company accounts for computer software developed or obtained for internal use in accordance with ASC 350-40, InternalUseSoftware(ASC 350-40), which
requires capitalization of certain software development costs incurred during the application development stage. In fiscal 2016, the Company capitalized $3.4
million in accordance with ASC 350-40, of which $0.8 million is classified as property and equipment and $2.1 million is classified as other long-term assets. In
fiscal 2015, the Company capitalized $1.5 million in accordance with ASC 350-40, of which $0.8 million is classified as property and equipment and $0.7 million
is classified as other long-term assets. At March 31, 2016, total capitalized software development costs included in property and equipment and other long-term
assets was approximately $1.2 and $2.5 million, respectively, and accumulated amortization costs related to capitalized software was approximately $0.2 million
and $0, respectively.
ADVERTISINGCOSTS
Advertising costs are expensed as incurred and were $8.5 million, $6.8 million and $7.3 million for the years ended March 31, 2016, 2015 and 2014, respectively.
FOREIGNCURRENCYTRANSLATION
The Company has determined that the functional currencies of all its foreign subsidiaries are the subsidiary's local currency. The Company believes this most
appropriately reflects the current economic facts and circumstances of the Company's subsidiaries operations. The assets and liabilities of the subsidiaries are
translated at the applicable exchange rate as of the end of the balance sheet period and revenue and expenses are translated at an average rate over the period
presented. Resulting currency translation adjustments are recorded as a component of accumulated other comprehensive income or loss within the stockholder's
equity in the consolidated balance sheets.
BUSINESSSEGMENTS
The Company has two reportable segments, Americas and Europe. The Company's chief operating decision makers, the Chief Executive Officer, Chief Financial
Officer, and Chief Technology Officer, evaluate performance of the Company and makes decisions regarding allocation of resources based on geographical results
(see Note 12).
SUBSCRIBERACQUISITIONCOSTS
Subscriber acquisition costs are expensed as incurred and include the advertising, marketing, promotions, commissions, rebates and equipment subsidy costs
associated with the Company's efforts to acquire new subscribers.
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. At March 31, 2016 and 2015, no customer accounted for more than 10% of accounts receivable.
The Company purchases all of its hardware products from suppliers that manufacturer the hardware directly. The inability of any supplier to fulfill supply
requirements of the Company could materially impact future operating results, financial position or cash flows. If any of these suppliers 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.
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