Incredimail 2010 Annual Report Download - page 96

INCREDIMAIL LTD AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Costs incurred by the Company between completion of the working model and the point at which the product is ready for
general release, are capitalized unless considered immaterial.
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.
The Company accounts for income taxes in accordance with ASC 740, "Income Taxes". 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.
The Company accounts for uncertain tax positions in accordance with ASC 740, which 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, 2008, 2009 and 2010
amounted to $3,466,000, $1,938,000 and $1,782,000, 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 2008, 2009 and 2010 amounted to $779,000, $620,000 and $554,000, respectively, of which $74,000,
$75,000 and $180,000 was capitalized and the remaining expensed as incurred. Amortization of capitalized content costs
in 2008, 2009 and 2010 amounted to $33,000, $65,000 and $101,000, respectively.
NOTE 2:
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SIGNIFICANT ACCOUNTING POLICIES (Cont.)
k.
Income taxes:
l.
Advertising costs:
m.
Content costs:
F
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