LeapFrog 2008 Annual Report Download - page 75

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LEAPFROG ENTERPRISES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share data)
assessment of independent valuations performed as of January 31, 2008 and 2007 to value its
investment in ARS. In accordance with the provisions of Statement of Financial Accounting Standards
No. 115, “Accounting for Certain Investments in Debt and Equity Securities” (“SFAS 115”), all
declines in the value of the ARS investment have been recorded as other-than-temporary impairment
losses in the statements of operations in “other income (expense).”
For the fiscal years ended December 31, 2008 and 2007, the Company accounted for losses incurred on its
ARS investments as shown below:
Long-term
Investments
Accumulated
Other
Comprehensive
Income **
Accumulated
Losses on
Investments
(Balance Sheet) (Balance Sheet) (Statements of
Operations)
Balance at December 31, 2006 ............................ $ — $— $ —
Purchases of auction rate securities in 2007 ............... 14,000 —
Unrealized losses for year—other-than-temporary .......... (2,477) — (2,477)
Unrealized losses—temporary ......................... (598) (598) —
Balance at December 31, 2007 ............................ 10,925 (598) (2,477)
Unrealized losses for year—other-than-temporary .......... (5,963) — (5,963)
Temporary loss transferred to other-than-temporary ........ — 598 (598)
Balance at December 31, 2008 ............................ $ 4,962 $ — $(9,038)
** Portion of the balance in “accumulated other comprehensive income” relating to temporary losses only.
The impairment losses recorded in 2008 include $598 of losses that had previously been accounted for as
temporary at December 31, 2007 and recorded in “accumulated other comprehensive income (loss)” at that date.
The loss of $598 was charged as an other-than-temporary loss to the statement of operations in the second quarter
of 2008 as credit market conditions throughout the first half of 2008 worsened. The Company has accounted for
all losses incurred in 2008 as other-than-temporary in the statement of operations.
Given the continuing turmoil in the credit markets, it is possible the fair values of these investments may
continue to decline. The Company will continue to evaluate and monitor the carrying value of its investment in
ARS in light of changing economic circumstances and will adjust the carrying values as necessary.
4. Inventories
The Company’s inventories, stated on a first-in, first-out basis at the lower of cost or market as of
December 31, 2008 and 2007 were as follows:
December 31,
2008 2007
Raw materials ............................................ $ 5,521 $ 2,358
Work in process ........................................... 1,621 4,663
Finished goods ............................................ 51,054 45,394
Total ............................................... $58,196 $52,415
F-17