Incredimail 2008 Annual Report Download - page 31

of the adoption of the recognition and measurement provisions of FIN No. 48.
As a result of the implementation of FIN No. 48, the Company recognized a $83 thousand increase in liability for unrecognized tax benefits,
which was accounted for as an decrease to the January 1, 2007 balance of retained earnings.
Impairment of investments in marketable securities.
We regularly review our investments for factors that may indicate that a decline in the fair value of an investment below its cost or amortized
cost is other-than-temporary. Some factors considered in evaluating whether or not a decline in fair value is other-than-temporary include: our
ability and intent to retain the investment for a period of time sufficient to allow for a recovery in value; the duration and extent to which the fair
value has been less than cost; and the financial condition and prospects of the issuer. Such reviews are inherently uncertain in that the value of the
investment may not fully recover or may decline further in future periods resulting in realized losses.
Impairment of Long
-Lived Assets.
Our long-lived assets include property and equipment, goodwill and other intangible assets. In assessing the recoverability of our property
and equipment and other intangible assets, we make judgments regarding whether impairment indicators exist based on legal factors, market
conditions and operating performances of our business and products. Future events could cause us to conclude that impairment indicators exist and
that the carrying values of the intangible assets or goodwill are impaired. Any resulting impairment loss could have a material adverse impact on
our financial position and results of operations.
We are required to assess the impairment of long-lived assets, tangible and intangible, other than goodwill, under SFAS No. 144,
“Accounting for the Impairment or Disposal of Long-Lived Assets,”
on a periodic basis, when events or changes in circumstances indicate that the
carrying value may not be recoverable. Impairment indicators include any significant changes in the manner of our use of the assets or the strategy
of our overall business, significant negative industry or economic trends and significant decline in our share price for a sustained period. For the
year ended December 31, 2007 and the year ended December 31, 2008, we recorded an impairment charge resulting from technology associated
with BizChord in the amount of $153 and $44 thousand , respectively
Upon determination that the carrying value of a long-lived asset may not be recoverable based upon a comparison of aggregate undiscounted
projected future cash flows to the carrying amount of the asset, an impairment charge is recorded for the excess of fair value over the carrying
amount. We measure fair value using discounted projected future cash flows.
Statement of Financial Accounting Standard No. 142, “Goodwill and Other Intangible Assets” (“SFAS No. 142”), prescribes a two-phase
process for impairment testing of goodwill. The first phase screens for impairment, while the second phase (if necessary) measures impairment. In
the first phase of impairment testing, goodwill attributable to each of the reporting units is tested for impairment by comparing the fair value of
each reporting unit with its carrying value. We operate in two operating segments, IncrediMail and BizChord, and these segments comprise our
reporting units. Goodwill is allocated to the reporting unit of BizChord. If the carrying value of the reporting unit exceeds its fair value, the second
phase is then performed. The second phase of the goodwill impairment test compares the implied fair value of the reporting unit’s goodwill with
the carrying amount of that goodwill. If the carrying amount of the reporting unit’s goodwill exceeds the implied fair value of that goodwill, an
impairment loss is recognized in an amount equal to that excess. Fair value is determined using discounted cash flows. Significant estimates used
in the fair value methodologies include estimates of future cash flows, future growth rates and the weighted average cost of capital of the reporting
unit. In 2007 and 2008, the Company recorded an impairment loss in the amounts of $163,000 and $125,000 in respect of BizChord reporting unit,
respectively.
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Recently issued accounting pronouncements:
In February 2008, the FASB issued FASB Staff Position (“FSP”) FAS No. 157-2, “Effective Date of FASB Statement No. 157” (“FSP 157-
2”),
to delay the effective date of FASB Statement 157 for one year for certain nonfinancial assets and nonfinancial liabilities, excluding those that
are recognized or disclosed in financial statements at fair value on a recurring basis (that is, at least annually). For purposes of applying the FSP
157-2, nonfinancial assets and nonfinancial liabilities include all assets and liabilities other than those meeting the definition of a financial asset or
a financial liability in FASB Statement 159. FSP 157-2 defers the effective date of Statement 157 to fiscal years beginning after November 15,
2008, and interim periods within those fiscal years for items within the scope of this FSP 157-2. The adoption of FAS 157 to nonfinancial assets
and nonfinancial liabilities under the scope of FSP 157-2 did not have a material impact on the Company's financial position, results of operations
or cash flows.
In March 2008, the FASB issued Statement 161 “Disclosures about Derivative Instruments and Hedging Activities” (“SFAS 161”) an
amendment to FASB No. 133. This statement changes the disclosure requirements for derivative instruments and hedging activities. Entities are
required to provide enhanced disclosures about (a) how and why and entity uses derivative instruments, (b) how derivative instruments and related
hedged items are accounted for under Statement 133 and its related interpretations, and (c) how derivative instruments and related hedged items
affect an entity’s financial position, financial performance, and cash flows. This statement is effective for financial statements issued for fiscal
years and interim periods beginning after November 15, 2008. Early application is encouraged. The adoption of SFAS 161 did not have a material