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As of April 1, 2007, we adopted the provisions of FASB Interpretation No. 48, ‘‘Accounting for Uncertainty
in Income Taxes—an interpretation of FASB Statement No. 109’’ (‘‘FIN 48’’). Previously, we had
accounted for income tax contingencies in accordance with SFAS No. 5, ‘‘Accounting for Contingencies.’’
As required by FIN 48, we recognize the financial statement benefit of an income tax position only after
determining that the relevant tax authority would more likely than not sustain the position following an
audit. For tax positions meeting the ‘‘more likely than not’’ threshold, the amount recognized in the
financial statements is the largest benefit that has a greater than 50% likelihood of being realized upon
ultimate settlement with the relevant tax authority. At the adoption date, we applied FIN 48 to all income
tax positions for which the statute of limitations remained open.
Basic and Diluted Earnings Per Share. Basic earnings per share is computed by dividing net income by the
weighted average number of common shares outstanding for the period. Diluted earnings per share is
computed by dividing net income by the weighted average number of common shares outstanding for the
period, increased by common stock equivalents. Common stock equivalents are calculated using the
treasury stock method and represent incremental shares issuable upon exercise of our outstanding options,
warrants, the employee stock purchase plan, other stock unit awards and, if applicable in the period,
conversion of our convertible debt. However, potential common shares are not included in the
denominator of the diluted earnings per share calculation when inclusion of such shares would be
anti-dilutive, such as in a period in which a net loss is recorded.
Recently Issued Accounting Pronouncements. In September 2006, the FASB issued SFAS No. 157, ‘‘Fair
Value Measurement’’ (‘‘FAS 157’’). FAS 157 provides a single definition of fair value, together with a
framework for measuring it, and requires additional disclosure about the use of fair value to measure
assets and liabilities. In February 2008, the FASB issued FSP FAS 157-2, ‘‘Effective Date of FASB
Statement No. 157’’ which defers the implementation for certain non-recurring, nonfinancial assets and
liabilities from fiscal years beginning after November 15, 2007 to fiscal years beginning after November 15,
2008, which will be our fiscal year 2010. The statement provisions effective as of April 1, 2008, do not have
a material effect on our results of operations, financial position, or cash flows. We are evaluating the
impact, if any, the adoption of the remaining provisions will have on our results of operations, financial
position or cash flows.
In February 2007, the FASB issued SFAS No. 159, ‘‘The Fair Value Option for Financial Assets and
Financial Liabilities—Including an Amendment of FASB Statement No. 115’’ (‘‘FAS 159’’). FAS 159
permits an entity to choose to measure many financial instruments and certain other items at fair value at
specified election dates. Subsequent unrealized gains and losses on items for which the fair value option
has been elected will be reported in earnings. We adopted this statement on April 1, 2008 and did not
make this election. As such, the adoption of this statement did not have any impact on our results of
operations, financial position or cash flows.
In May 2008, the FASB issued SFAS No. 162, ‘‘The Hierarchy of Generally Accepted Accounting
Principles’’ (‘‘FAS 162’’). FAS 162 is intended to improve financial reporting by identifying a consistent
framework, or hierarchy, for selecting accounting principles to be used in preparing financial statements
that are presented in conformity with GAAP for nongovernmental entities. FAS 162 is effective 60 days
following the SEC’s approval of the Public Company Accounting Oversight Board amendments to AU
Section 411, ‘‘The Meaning of Present Fairly in Conformity with Generally Accepted Accounting
Principles.’’ We do not expect the adoption of this statement to have a material impact on our results of
operations, financial position or cash flows.
In December 2007, the FASB issued SFAS No. 141R, ‘‘Business Combinations’’ (‘‘FAS 141R’’). FAS 141R
retains the fundamental requirements in FAS 141 that the acquisition method of accounting (which
FAS 141 called the purchase method) be used for all business combinations and for an acquirer to be
identified for each business combination. FAS 141R defines the acquirer as the entity that obtains control
of one or more businesses in the business combination and establishes the acquisition date as the date that
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