TeleNav 2011 Annual Report Download - page 57

Table of Contents
fees. We expense preliminary evaluation costs as they are incurred before the application development stage, as well as post development
implementation and operation costs, such as training, maintenance and minor upgrades. We begin amortizing capitalized costs when a project is
ready for its intended use, and we periodically reassess the estimated useful life of a project considering the effects of obsolescence, technology,
competition and other economic factors which may result in a shorter remaining life.
We capitalized $1.6 million, $2.4 million and $1.2 million of software development costs during fiscal 2009, 2010 and 2011, respectively.
Amortization expense related to these costs, which was recorded in cost of revenue, totaled $418,000, $939,000 and $2.0 million for fiscal 2009,
2010 and 2011, respectively.
We also account for the costs of computer software we develop for customers requiring significant modification or customization by
deferring qualifying costs under the completed contract method. All such development costs incurred are deferred until the related revenue is
recognized. We deferred $800,000, $1.3 million and $2.1 million of software development costs during fiscal 2009, 2010 and 2011,
respectively. Upon delivery of certain customized software in fiscal 2011, we recognized in cost of revenue $1.8 million of previously deferred
costs.
Impairment of long-lived assets . We evaluate long-
lived assets held and used for impairment whenever events or changes in circumstances
indicate that their net book value may not be recoverable. We continually evaluate whether events and circumstances have occurred that indicate
the balance of our property and equipment and intangible assets with definite lives may not be recoverable. Our evaluation is significantly
impacted by our estimates and assumptions of future revenue, costs, and expenses and other factors. If an event occurs that would cause us to
revise our estimates and assumptions used in analyzing the value of our property and equipment, that revision could result in a non-cash
impairment charge that could have a material impact on our financial results. When these factors and circumstances exist, we compare the
projected undiscounted future cash flows associated with the related asset or group of assets over their estimated useful lives against their
respective carrying amounts. We base the impairment, if any, on the excess of the carrying amount over the fair value, based on market value
when available, or discounted expected cash flows of those assets, and record it in the period in which we make the determination.
Stock-based compensation expense . We account for stock-based employee compensation arrangements under the fair value recognition
method, which requires us to measure the stock-based compensation costs of share-based compensation arrangements based on the grant date
fair value, and recognize the costs in the financial statements over the employees’ requisite service period. We recognize compensation expense
for the fair value of these awards with time based vesting on a straight-line basis over an employee’s requisite service period of each of these
awards, net of estimated forfeitures.
Our stock-based compensation expense was as follows:
As of June 30, 2011, there was $11.6 million of unrecognized stock-based compensation expense related to unvested stock option awards,
net of estimated forfeitures, that we expect to be recognized over a weighted average period of 2.9 years.
53
Fiscal Year Ended June 30,
2011 2010 2009
(in thousands)
Cost of revenue
$
97
$
18
$
4
Research and development
1,965
2,604
237
Selling and marketing
1,003
516
155
General and administrative
1,072
1,789
111
Total stock
-
based compensation expense
$
4,137
$
4,927
$
507