Incredimail 2009 Annual Report Download - page 93

INCREDIMAIL LTD .
AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Capitalized software development costs are amortized commencing with general product release, by the greater of the
amount computed using the: (i) ratio between current gross revenues from sales of the software to the total of current
and anticipated future gross revenues from sales of that software, or (ii) the straight-line method over the estimated
useful life of the product. The Company assesses the recoverability of this intangible asset on an annually basis by
determining whether the amortization of the asset over its remaining life can be recovered through undiscounted
future operating cash flows from the specific software product sold. Based on its analyses, management believes that
no impairment of capitalized software development cost exist as of December 31, 2009.
The Company accounts for income taxes in accordance with ASC 740, "Income Taxes" (formerly SFAS No. 109).
This Statement prescribes the use of the liability method whereby deferred tax assets and liability account balances
are determined based on differences between financial reporting and tax bases of assets and liabilities and are
measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The
Company provides a valuation allowance, if necessary, to reduce deferred tax assets to their estimated realizable
value.
On January 1, 2007, the Company adopted ASC 740 with respect to uncertain tax positions (formerly FASB
Interpretation No. 48, ("FIN 48")). ASC 740, contains a two-step approach for recognizing and measuring uncertain
tax positions. The first step is to evaluate the tax position taken or expected to be taken in a tax return by determining
if the weight of available evidence indicates that it is more likely than not that, on an evaluation of the technical
merits, the tax position will be sustained on audit, including resolution of any related appeals or litigation processes.
The second step is to measure the tax benefit as the largest amount that is more than 50% likely to be realized upon
ultimate settlement. The Company classifies interest as tax expenses.
Advertising costs are expensed as incurred. Advertising costs for the years ended December 31, 2007, 2008 and 2009
amounted to $1,411,000, $3,466,000 and $1,938,000, respectively.
The Company assembles content for the use of its customers through purchases of a variety of creative and diverse
graphics, sound and multimedia from third party manufacturers and through internal creation of such content. Content
costs acquired from third party manufacturers, are capitalized and amortized over their estimated useful life of three
years.
Content costs in 2007, 2008 and 2009 amounted to $568,000, $779,000 and $620,000, respectively, of which
$84,000, $74,000 and $75,000 was capitalized and the remaining expensed as incurred. Amortization of capitalized
content costs in 2007, 2008 and 2009 amounted to $17,000, $33,000 and $65,000, respectively.
NOTE 2:
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SIGNIFICANT ACCOUNTING POLICIES (Cont.)
m.
Income taxes:
n.
Advertising costs:
o.
Content costs:
F-12