TiVo 2005 Annual Report Download - page 68

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Table of Contents
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and
assumptions. Actual results could differ from those estimates.
Cash and Cash Equivalents
Cash and cash equivalents include all highly liquid investments with original maturities of three months or less. The carrying value of the cash and cash
equivalents approximates fair value.
Short-term Investments
Short-term investments include U.S. corporate debt securities and U.S. Treasury and Agency securities. Short-term investments are classified as
available-for-sale and are carried at fair value. The Company's short-term investments are reviewed each reporting period for declines in value that are
considered to be other-than temporary and, if appropriate, written down to their estimated fair value. Realized gains and losses and declines in value judged to
be other-than-temporary on available-for-sale securities are included in the Company's consolidated statements of operations. Unrealized gains and losses are
included in other comprehensive income (loss). The cost of securities sold is based on the specific identification method. Interest and dividends on securities
classified as available-for-sale are included in interest income in the consolidated statements of operations.
Finished Goods Inventories
TiVo maintains a finished goods inventory of DVRs throughout the year. Inventories are stated at the lower of cost or net realizable value on an
aggregate basis, with cost determined using the first-in, first-out method. The Company performs a detailed assessment of inventory at each balance sheet
date, which includes a review of, among other factors, demand requirements and market conditions. Based on this analysis, the Company records adjustments,
when appropriate, to reflect inventory at lower of cost or market.
Property and Equipment
Property and equipment are stated at cost. Maintenance and repair expenditures are expensed as incurred.
Depreciation is computed using the straight-line method over estimated useful lives as follows:
Furniture and fixture 3-5 years
Computer and office equipment 3-5 years
Lab equipment 3 years
Leasehold improvements
The shorter of 7 years or the
life of the lease
Capitalized software for internal use 1-5 years
Capitalized Software
Costs of computer software to be sold, leased or otherwise marketed have been accounted for in accordance with Statements of Financial Accounting
Standards (SFAS ) No. 86, "Accounting for the Costs of Computer Software to Be Sold, Leased, or Otherwise Marketed." The Company achieves
technological feasibility upon development of a working model. The period between the development of a working model and the release of the final product
to customers is short, and, therefore, the development costs incurred during this short period are immaterial and, as such, are not capitalized.
The Company accounts for costs related to internally-developed software and software purchased for internal use in accordance with the American
Institute of Certified Public Accountants ("AICPA") Statement of Position ("SOP") No. 98-1 "Accounting for Cost of Computer Software Developed or
Obtained for Internal Use." In accordance with SOP 98-1, software development costs incurred as part of an approved project plan that result in additional
functionality to internal use software are capitalized and amortized on a straight-line basis over the estimated useful life of the software, generally three years.
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