Incredimail 2010 Annual Report Download - page 93

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INCREDIMAIL LTD AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The consolidated financial statements include the accounts of the Company and its subsidiaries. Intercompany balances
and transactions have been eliminated upon consolidation.
The Company considers short-
term unrestricted highly liquid investments that are readily convertible into cash, purchased
with original maturities of three months or less to be cash equivalents.
The Company accounts for investments in debt securities in accordance with ASC 320, "Investments -
Debt and Equity
Securities". Management determines the appropriate classification of its investments in debt securities at the time of
purchase and reevaluates such determinations at each balance sheet date.
At December 31, 2009 and 2010, all marketable securities are designated as available-for-
sale and as such, are carried at
fair value. Unrealized gains and losses are comprised of the difference between market value and amortized costs of such
securities and are reflected, net of tax, as “accumulated other comprehensive income” in shareholders’
equity. Realized
gains and losses on marketable securities are included in earnings. The Company recognizes an impairment charge when a
decline in the fair value of its investments below the cost basis, is judged to be other-than-temporary.
In April 2009, the FASB issued authoritative guidance on recognition and presentation of other-than-
temporary
impairments. This guidance clarifies the interaction of the factors that should be considered when determining whether a
debt security is other than temporarily impaired; provides guidance on the amount of other-than-
temporary impairment
recognized in earnings and other comprehensive income; and expands the disclosures required for other-than-
temporary
impairments for debt securities. For securities that the Company intends to sell, or it is more likely than not that the
Company will be required to sell before recovery of their amortized cost basis, the entire difference between amortized
cost and fair value is recognized in earnings. For securities that do not meet these criteria, the amount of impairment
recognized in earnings is limited to the amount related to credit losses, while impairment related to other factors is
recognized in other comprehensive income. The Company adopted this guidance on April 1, 2009, and reclassified the
$210 non-
credit related portion of other than temporary impairment losses recognized in prior period earnings, as a
cumulative effect adjustment that increased retained earnings and decreased accumulated other comprehensive income at
April 1, 2009.
The Company uses a discounted cash flow analysis to determine the portion of the impairment that relates to the credit
loss. To the extent that the net present value of the projected cash flows is less than the amortized cost of the security, the
difference is considered a credit loss and is recorded through earnings.
NOTE 2:
-
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
c.
Principles of consolidation:
d.
Cash equivalents:
e.
Marketable securities:
F
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