Support.com 2008 Annual Report Download - page 60

Table of Contents
SUPPORTSOFT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The following table sets forth the unrealized losses for the Company’s available-for-sale investments as of December 31, 2008 (in thousands):
In Loss Position
Less Than 12 Months
In Loss Position
More Than 12 Months Total In Loss Position
Description
Fair
Value
Unrealized
Losses Fair Value
Unrealized
Losses Fair Value
Unrealized
Losses
Corporate bonds $ 2,999 $ (1) $ — $ — $ 2,999 $ (1)
Auction rate securities — — 15,766 (1,586) 15,766 (1,586)
Total $ 2,999 $ (1) $ 15,766 $ (1,586) $ 18,765 $ (1,587)
Auction Rate Security Put Option
In November, 2008, SupportSoft signed a Rights Agreement with UBS concerning the disposition of its Auction Rate Securities (ARS). The UBS
agreement gives SupportSoft the right to sell its ARS holdings back to UBS, at par value, beginning June 30, 2010 through July 2, 2012. Prior to June 30, 2010,
UBS has the right to sell SupportSoft’s ARS holdings at any time, and return par value to the Company. The rights represent a freestanding financial instrument
for accounting purposes. As noted above, we elected to value this “put” option at fair value as allowed under SFAS No. 159. As such, we recognized the value of
the repurchase right as an asset with the corresponding gain recorded in earnings. Fair value was determined using a “with and without” approach, based on a
discounted cash flow valuation comparing the value of the auction rate securities with the put option and without it. We took into account the same factors as
those used to value the auction rate securities noted above. The value of the rights offer was recorded in interest income and expense, net. As of December 31,
2008, the value of the ARS Put Option was $7.1 million, which off-set the realized loss recorded on the related auction rate securities in our Statement of
Operations.
Our auction-rate securities continue to be presented as long-term investments on the Company’s balance sheet, while the value of the rights agreement is
presented separately as auction-rate securities put option. This ARS Put Option is not a traditional put option in that it is non-transferable, non-assignable, and not
available for trade in any financial market. If UBS has insufficient funding to fulfill their obligation to buy back the ARS per the Rights Agreement, then we may
incur further losses in our Statement of Operations.
The offer of rights includes the right to a loan from UBS at no net cost, for up to the amount of the par value of our eligible auction-rate securities. The
loan option is available until June 30, 2010. As of December 31, 2008, we had not exercised our right to obtain a loan.
Property and Equipment
Property and equipment is stated at cost, less accumulated depreciation which is determined using the straight-line method over the estimated useful lives
of 2 years for computer equipment and software, 3 years for furniture and fixtures, and the shorter of the estimated useful lives or the lease term for leasehold
improvements. Repairs and maintenance costs are expensed as incurred.
Purchased Technology
Purchased technology consists of software that we licensed and incorporated into our product and service offerings. Purchased technology is accounted for
in accordance with SFAS No. 86, “Accounting for the Costs of Computer Software to be Sold, Leased, or Otherwise Marketed.” Upon general release of the
product that
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Source: SUPPORTSOFT INC, 10-K, March 11, 2009