Incredimail 2011 Annual Report Download - page 104

PERION NETWORK LTD. AND ITS SUBSIDIARIES
(Formerly: Incredimail Ltd.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
NOTE 3:
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SIGNIFICANT ACCOUNTING POLICIES (Cont.)
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. In the years ended December 31, 2009 and 2010 the
Company accrued interest and penalties related to unrecognized tax benefits in its tax expenses. During 2009 and 2010 interest expense
amounted to $ 201 and $ 140, respectively. Starting 2011, the Company changed the classification of interest from tax expenses to financial
expenses as it distorts its tax expense. Interest for 2011 amounted to income of $ 988. As the amount included in tax expense for interest during
2009 and 2010 was immaterial, the Company did not reclassify such amounts to conform to current year's presentation.
m.
Advertising costs:
Advertising costs are expensed as incurred and consist primarily of customer acquisition cost. Advertising costs for each of the three years in
the period ended December 31, 2011 amounted to $ 1,938, $ 1,782 and $ 8,136, respectively.
n.
Concentrations of credit risk:
Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents and
trade receivables.
The majority of the Company’
s cash and cash equivalents are invested mainly in dollar instruments with major banks in Israel and the U.S.
deposits in the U.S. may be in excess of insured limits and are not insured in other jurisdictions. Generally, these deposits may be redeemed
upon demand and, therefore, bear minimal risk.
The Company is subject to a low amount of credit risk with respect to sales of the Company’
s software products and content database, as these
sales are primarily obtained through credit card sales. The Company’
s major customer is financially sound, and the Company believes low
credit risk is associated with this customer. To date, the Company has not experienced any material bad debt losses.
The Company entered into option strategies intended to protect against the increase in value of forecasted non-
dollar currency cash flows. The
derivative instruments hedge a portion of the Company's non
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dollar currency exposure
F
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