Enom 2010 Annual Report Download - page 84

Table of Contents
prospective method and the adoption of this accounting standard did not have a material effect on the Company's financial position or results of operations.
In October 2009, the FASB issued Update No. 2009-14, Software (Topic 985)—Certain Revenue Arrangements That Include Software Elements, a
consensus of the FASB Emerging Issues Task Force ("ASU 2009-14"). ASU 2009-14 changes the accounting model for revenue arrangements that include
both tangible products and software elements and provides additional guidance on how to determine which software, if any, relating to tangible product would
be excluded from the scope of the software revenue guidance. In addition, ASU 2009-14 provides guidance on how a vendor should allocate arrangement
consideration to deliverables in an arrangement that includes both tangible products and software. ASU 2009-14 is effective prospectively for revenue
arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010. Alternatively, the Company may retrospectively apply
the guidance to all periods. The Company adopted ASU 2009-14 using the prospective method and the adoption did not have a material effect on the
Company's financial position or results of operations.
Item 7A. Quantitative and Qualitative Disclosures about Market Risks
We are exposed to market risks in the ordinary course of our business. These risks primarily include interest rate, foreign exchange, inflation, and
concentration of credit risk. To reduce and manage these risks, we assess the financial condition of our large advertising network providers, large direct
advertisers and their agencies, large Registrar resellers and other large customers when we enter into or amend agreements with them and limit credit risk by
collecting in advance when possible and setting and adjusting credit limits where we deem appropriate. In addition, our recent investment strategy has been to
invest in high credit quality financial instruments, which are highly liquid, are readily convertible into cash and that mature within one year from the date of
purchase.
Foreign Currency Exchange Risk
While relatively small, we have operations and generate revenue from sources outside the United States. We have foreign currency risks related to our
revenue being denominated in currencies other than the U.S. dollar, principally in the Euro and British Pound Sterling and a relatively smaller percentage of
our expenses being denominated in such currencies. We do not believe movements in the foreign currencies in which we transact will significantly affect
future net earnings or losses. Foreign currency risk can be quantified by estimating the change in cash flows resulting from a hypothetical 10% adverse change
in foreign exchange rates. We believe such a change would not currently have a material impact on our results of operations. However, as our international
operations grow, our risks associated with fluctuation in currency rates will become greater, and we intend to continue to assess our approach to managing this
risk.
Inflation Risk
We do not believe that inflation has had a material effect on our business, financial condition or results of operations. If our costs were to become subject
to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases. Our inability or failure to do so could harm
our business, financial condition and results of operations.
Concentrations of Credit Risk
As of December 31, 2010, our cash, cash equivalents and short-term investments were maintained primarily with four major U.S. financial institutions
and two foreign banks. We also maintained cash balances with one Internet payment processor in both periods. Deposits with these institutions at times
exceed the federally insured limits, which potentially subject us to concentration of credit risk.
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