Incredimail 2009 Annual Report Download - page 35

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General and Administrative Expenses
Our general and administrative expenses consist primarily of salaries and other personnel-
related expenses for executive, accounting
and administrative personnel, professional fees and other general corporate expenses. We do not currently expect a significant increase in our
general and administrative expenses in 2010.
Income Tax Expense (Benefit)
In 2001 and 2003, we were granted the status of “Approved Enterprise” and in 2008 we received approval for continued “
Beneficiary
Enterprise”
status, all with respect to three separate investment programs, entitling us to a tax exemption for a period of two years and to a
reduced tax rate of 10%-
25% for an additional period of five to eight years (depending on the level of foreign investment in our Company). The
“Approved Enterprise” status and the “Beneficiary Enterprise”
status allow for 0% corporate tax for a limited period of time on undistributed
profits generated from operations, and preferential taxation of the distributed portion, requiring regular Israeli corporate tax on income generated
from other sources. To the extent the Company distributes dividends from profits generated under this program, as it has in 2009, the distributed
sum would benefit only partially from this program. See “Israeli Taxation—Law for the Encouragement of Capital Investments, 1959”
and Item
8. Financial Information A. Consolidated Statements and Other Financial Information -
Policy on Dividend Distribution, for more information
about these programs and the Company’s dividend policy.
Critical Accounting Policies and Estimates
The discussion and analysis of our financial condition and results of operation are based on our financial statements, which have been
prepared in conformity with U.S. GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect
the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We evaluate these
estimates on an on-
going basis. We base our estimates on our historical experience and on various other assumptions that we believe to be
reasonable under the circumstances, the results of which form the basis for making judgments about the carrying amount values of assets and
liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or
conditions. Under U.S. GAAP, when more than one accounting method or policy or its application is generally accepted, our management
selects the accounting method or policy that it believes to be most appropriate in the specific circumstances. Our management considers some of
these accounting policies to be critical.
A critical accounting policy is an accounting policy that management believes is both most important to the portrayal of our financial
condition and results and requires management’
s most difficult subjective or complex judgment, often as a result of the need to make accounting
estimates about the effect of matters that are inherently uncertain. While our significant accounting policies are discussed in Note 2 to our
financial statements, we believe the following accounting policies to be critical:
Revenue recognition
Revenues from advertising, whether from keyword search, advertising on our website or in our email client, are recognized when we
are entitled to receive the fee. Advertisers are charged and pay monthly, based on the number of clicks generated by users clicking on these ads.
In accordance with ASC 605-50, "Customer Payments and Incentives"( formerly EITF No. 01-
9) the Company accounts for cash
consideration given to customers, for which it does not receive a separately identifiable benefit or cannot reasonably estimate fair value, as a
reduction of revenue rather than as an expense.
Revenues from email software license sales are recognized when all criteria outlined in ASC 985-605, "Software – Revenue
Recognition", (formerly Statement of Position ("SOP") 97-2, as amended), are met. Revenues from software license are recognized when
persuasive evidence of an agreement exists, delivery of the product has occurred, the fee is fixed or determinable and collectability is probable.
For substantially all of our software arrangements, we evaluate each of these criteria as follows:
Evidence of an arrangement : We consider a clicking on “acceptance” of the agreement terms to be evidence of an arrangement.
Delivery
: Delivery is considered to occur when the license key is sent via email to the customer or alternatively the customer is given
access to download the licensed key.
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