Crucial 2011 Annual Report Download - page 42

Research and Development : Costs related to the conceptual formulation and design of products and processes are expensed as research and
development as incurred. Determining when product development is complete requires judgment by us. We deem development of a product
complete once the product has been thoroughly reviewed and tested for performance and reliability. Subsequent to product qualification, product
costs are valued in inventory.
Stock-based Compensation : Compensation cost for stock-based compensation is estimated at the grant date based on the fair-value of the
award and is recognized as expense ratably over the requisite service period of the award. For stock-based compensation awards with graded
vesting that were granted after 2005, we recognize compensation expense using the straight-line amortization method. For performance-based
stock awards, the expense recognized is dependent on the probability of the performance measure being achieved. We utilize forecasts of future
performance to assess these probabilities and this assessment requires considerable judgment.
Determining the appropriate fair-value model and calculating the fair value of stock-based awards at the grant date requires considerable
judgment, including estimating stock price volatility, expected option life and forfeiture rates. We develop these estimates based on historical data
and market information which can change significantly over time. A small change in the estimates used can result in a relatively large change in
the estimated valuation. We use the Black-Scholes option valuation model to value employee stock awards. We estimate stock price volatility
based on an average of its historical volatility and the implied volatility derived from traded options on our stock.
Recently Adopted Accounting Standards
In June 2009, the Financial Accounting Standards Board ("FASB") issued a new accounting standard on variable interest entities ("VIEs")
which (1) replaces the quantitative-based risks and rewards calculation for determining whether an enterprise is the primary beneficiary in a VIE
with an approach that is primarily qualitative, (2) requires ongoing assessments of whether an enterprise is the primary beneficiary of a VIE and
(3) requires additional disclosures about an enterprise's involvement in VIE. We adopted this standard as of the beginning of 2011. The initial
adoption of this standard did not have a significant impact on our financial statements as of the adoption date. The impact on future periods will
depend on changes in the nature and composition of our VIEs.
Recently Issued Accounting Standards
In May 2011, the FASB issued a new accounting standard on fair value measurements that clarifies the application of existing guidance and
disclosure requirements, changes certain fair value measurement principles and requires additional disclosures about fair value measurements. We
are required to adopt this standard in the third quarter of 2012. We do not expect this adoption to have a material impact on our financial
statements.
In June 2011, the FASB issued a new accounting standard on the presentation of comprehensive income. The new standard requires the
presentation of comprehensive income, the components of net income and the components of other comprehensive income either in a single
continuous statement of comprehensive income or in two separate but consecutive statements. The new standard also requires presentation of
adjustments for items that are reclassified from other comprehensive income to net income in the statement where the components of net income
and the components of other comprehensive income are presented. We are required to adopt this standard as of the beginning of 2013. The
adoption of this standard will only impact the presentation of our financial statements.
41