Support.com 2011 Annual Report Download - page 20

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We are also subject to other routine legal proceedings, as well as demands, claims and threatened litigation, that arise in the normal course of
our business, potentially including assertions that we may be infringing patents or other intellectual property rights of others. We accrue for legal
contingencies if we can estimate the potential liability and if we believe it is more likely than not that the case will be ruled against us. If a legal claim
for which we did not accrue is resolved against us, we would record the expense in the period in which the ruling was made. We currently do not
believe that the ultimate amount of liability, if any, for any pending claims of any type (alone or combined) will materially affect our financial position,
results of operations or cash flows. The ultimate outcome of any litigation is uncertain, however, and unfavorable outcomes could have a material
negative impact on our financial condition and operating results. Regardless of outcome, litigation can have an adverse impact on us because of
defense costs, negative publicity, diversion of management resources and other factors.
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We are required to make periodic filings in the jurisdictions where we are deemed to have a presence for tax purposes. We have undergone
audits in the past and have paid assessments arising from these audits. Our India entity was issued notices of income tax assessment pertaining to the
2004-2005, 2005-2006, 2006-2007 and 2007-2008 fiscal years. The notices claimed that the transfer price used in our inter-company agreements
with our India entity was too low, and that the price should be increased. We believe our current transfer pricing position is more likely than not to be
sustained. We believe that this will be resolved through the normal judicial appeal process used in India, and have submitted our case to the court. If
we do not win our case we may incur additional payments, potentially up to $327,000.
We may be subject to other income tax assessments in the future. We evaluate estimated expenses that could arise from those assessments in
accordance with ASC 740, . We consider such factors as the degree of probability of an unfavorable outcome and the ability to make a
reasonable estimate on the amount of expenses. We record the estimated liability amount of those assessments that meet the definition of an uncertain
tax position under ASC 740.
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We have identified guarantees in accordance with ASC 450, . The guidance stipulates that an entity must recognize an initial
liability for the fair value, or market value, of the obligation it assumes under the guarantee at the time it issues such a guarantee, and must disclose that
information in its interim and annual financial statements. We have entered into various service level agreements with our channel partners, in which
we may guarantee the maintenance of certain service level thresholds. Under some circumstances, if we do not meet these thresholds, we may be liable
for certain financial costs. We evaluate costs for such guarantees under the statement for accounting for contingencies, as interpreted by the guidance
for guarantor’s accounting and disclosure requirements for guarantees. We consider such factors as the degree of probability that we would be
required to satisfy the liability associated with the guarantee and the ability to make a reasonable estimate of the resulting cost. To date, we incurred
immaterial costs of less than 1% of revenue as a result of any such obligations and have not accrued any liabilities related to such obligations in the
consolidated financial statements as of December 31, 2011 and 2010.
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Not applicable.
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