TiVo 2007 Annual Report Download - page 66

Table of Contents
Allowance for doubtful accounts
TiVo also maintains an allowance for doubtful accounts to reserve for potentially uncollectible trade receivables. The Company reviews its trade
receivable by aging category to identify significant customers with known disputes or collection issues. For accounts not specifically identified, the Company
provides reserves based on the age of the receivable. In determining the reserve, the Company makes judgments about the credit-worthiness of significant
customers based on ongoing credit evaluations. TiVo also considers its historical level of credit losses and current economic trends that might impact the level
of future credit losses.
Beginning Balance
Charged to Operating
Expenses Deductions/Additions(*) Ending Balance
(In thousands)
Allowance for doubtful accounts:
Year Ended:
January 31, 2008 $ 271 $ 1,059 $ (136) $ 1,194
January 31, 2007 $ 56 $ 718 $ (503) $ 271
January 31, 2006 $ 104 $ 373 $ (421) $ 56
(*)Deductions/additions related to the allowance for doubtful accounts represent amounts written off against the allowance, less recoveries.
Inventories and Inventory Valuation
Inventories consist primarily of finished DVR units and are stated at the lower of cost or market on an aggregate basis, with cost determined using the
first-in, first-out method. The Company performs a detailed assessment of excess and obsolete inventory and purchase commitments 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 of finished products and materials on hand at lower of cost or market and to reserve for products and materials which
are not forecasted to be used in future production. During the quarter ended July 31, 2007, the Company recorded an impairment charge of $11.2 million to
cost of hardware revenues for inventory on hand and for excess non-cancelable purchase commitments. During the six month period ended January 31, 2008,
$4.8 million of this charge was offset by sales of the previously written down inventory. During the year ended January 31, 2007, the Company had impaired
$2.0 million in inventory and reserved approximately $500,000 for excess non-cancelable purchase commitments. Should actual market conditions differ from
the Company's estimates, the Company's future results of operations could be materially affected.
Property and Equipment
Property and equipment are stated at cost less depreciation. 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 4 years or the term 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 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.
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