Carbonite 2011 Annual Report Download - page 62

Table of Contents
Carbonite, Inc.
Impairment of Long-Lived Assets
The Company reviews property and
equipment and intangible assets for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. If the recoverability of these assets is considered to be impaired, the impairment to be recognized
equals the amount by which the carrying value of the assets exceeds its estimated fair value. The Company has not identified any impairment of its long-
lived assets as of December 31, 2011, 2010 and 2009.
Goodwill and Acquired Intangible Assets
The Company records goodwill when consideration paid in a business acquisition exceeds the fair value of the net tangible assets and the
identified intangible assets acquired. Goodwill is not amortized, but rather is tested for impairment annually or more frequently if facts and
circumstances warrant a review. The Company performs its annual assessment for impairment of goodwill on November 30 and considers its business to
be one reporting unit for the purpose of conducting this assessment. The assessment consists of estimating the fair value of the reporting unit (based on
the Company’s market capitalization) and comparing this amount to the carrying value of the reporting unit (as reflected by the Company’s total
stockholders’ equity). Based on the recent evaluation, the Company determined that its goodwill was not impaired.
Intangible assets acquired in a business combination are recorded under the acquisition method of accounting at their estimated fair values at the
date of acquisition. As the pattern of consumption of the economic benefits of the intangible assets cannot be reliably determined, the Company
amortizes acquired intangible assets over their estimated useful lives on a straight-line basis.
Software and Website Development Costs
The Company follows the guidance of ASC 350-40, Internal Use Software and ASC 350-50, Website Development Costs , in accounting for its
software and website development costs. The costs incurred in the preliminary stages of development are expensed as incurred. Once an application has
reached the development stage, internal and external costs, if direct and incremental, are capitalized until the application is substantially complete and
ready for its intended use. Because the Company believes the majority of its development efforts are categorized in operation stage (post-
implementation), no costs have been capitalized to date. These costs are included in the accompanying statements of operations as research and
development expense.
Advertising Expenses
The Company expenses advertising costs as incurred. During the years ended December 31, 2011, 2010, and 2009, the Company incurred
approximately $25.1 million, $23.6 million, and $10.8 million of advertising expense, respectively, which is included in sales and marketing expense in
the accompanying statements of operations.
Accounts Receivable
Accounts receivable are recorded at the invoiced amount. The allowance for doubtful accounts is the Company’s best estimate of the amount of
probable credit losses in the Company’s existing accounts receivable. The Company specifically analyzes historical bad debts, the aging of the accounts
receivable, creditworthiness, and current economic trends, to evaluate the allowance for doubtful accounts. Past due balances are reviewed individually
for collectability. Account balances are charged off against the allowance after all means of collection have been exhausted, and the potential for
recovery is considered remote.
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