Support.com 2008 Annual Report Download - page 67

Table of Contents
SUPPORTSOFT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
losses and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary
differences are expected to be reversed or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the consolidated
statements of operations in the period that includes the enactment date. A valuation allowance is recorded to reduce the carrying amounts of deferred tax assets, if
it is more likely than not, that such assets will not be realized.
Warranties and Indemnifications
In the Company’s Consumer segment, the direct-to-consumer channel generally provides a five-day warranty period during which refunds may be granted.
With partner, the warranty period may vary across channels, and in some channels the Company’s partner bears the cost of refunds. Refunds in this segment have
not been material to date.
In the Company’s Enterprise segment, the Company generally provides a warranty for its software products and services to its customers and accounts for
its warranties under the FASB’s SFAS No. 5, “Accounting for Contingencies.” Our standard warranty period is 90 days, but warranty periods can sometimes be
longer and vary from customer to customer. In the event there is a breach of such warranties, SupportSoft generally is obligated to correct the product or service
to conform to the warranty provision or, if SupportSoft is unable to do so, the customer is entitled to seek a refund of the purchase price of the product or service.
In certain contracts a material breach of warranty may involve penalties payable to the customer. SupportSoft did not provide for a warranty accrual as of
December 31, 2008 and 2007. To date, SupportSoft’s product warranty expense has not been significant.
The Company generally agrees to indemnify its customers against legal claims that its software products infringe certain third-party intellectual property
rights and accounts for its indemnification obligations under SFAS No. 5. To date, SupportSoft has not been required to make any payment resulting from
infringement claims asserted against our customers and has not recorded any related accruals.
Fair Value Measurements
Effective January 1, 2008, SupportSoft adopted SFAS No. 157, “Fair Value Measurements.” SFAS No. 157 defines fair value, establishes a framework for
measuring fair value under generally accepted accounting principles and enhances disclosures about fair value measurements. Fair value is defined under SFAS
No. 157 as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the
asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value under SFAS
No. 157 must maximize the use of observable inputs and minimize the use of unobservable inputs. The standard describes a fair value hierarchy based on three
levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value, which are the following:
• Level 1—Quoted prices in active markets for identical assets or liabilities.
• Level 2—Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted
prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full
term of the assets or liabilities.
• Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
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Source: SUPPORTSOFT INC, 10-K, March 11, 2009