Incredimail 2009 Annual Report Download - page 91

INCREDIMAIL LTD .
AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company's long-lived assets, tangible and intangible, other than goodwill, are reviewed for impairment in
accordance with ASC 360, "Property Plant and Equipment" (formerly SFAS No. 144), whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be
held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted cash flows
expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is
measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be
disposed of are reported at the lower of the carrying amount or fair value less costs to sell.
In 2007 and 2008, the Company recorded an impairment loss to cost of revenues in the amounts of $153,000 and
$44,000, respectively, in respect of core technology acquired in the acquisition of Bizchord. No such impairment was
recorded in 2009.
Goodwill represents the excess of the cost over the fair value of the net assets of businesses acquired. Under ASC
350, "Intangibles – Goodwill and Other" (formerly SFAS No. 142) goodwill is not amortized but instead is tested for
impairment at least annually (or more frequently if impairment indicators arise).
ASC 350 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. 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. No such impairment was recorded in 2009.
The Company derives revenues from: (i) advertising and other services and (ii) from product sales. Revenues from
advertising and other services include search related advertising, other advertising and collaboration arrangements.
Revenues from products include licensing the right to use its email software, content database and email anti spam.
The Company generates revenues from search related advertising, receiving a share of the advertising revenues from
companies providing search capabilities. In addition, the Company offers advertisers the ability to place text-based
ads on its website and banners in its email clients. Advertisers are charged monthly based on the number of times a
user clicks
on one of the ads. The Company recognizes revenue from direct and third party advertisement at that time.
NOTE 2:
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SIGNIFICANT ACCOUNTING POLICIES (Cont.)
i.
Impairment of long
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lived assets:
j.
Goodwill:
k.
Revenue recognition:
F-10