TiVo 2007 Annual Report Download - page 70

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Table of Contents
Income Taxes
The Company accounts for income taxes under the liability method in accordance with SFAS No. 109, "Accounting for Income Taxes." Effective
February 1, 2007, the Company adopted FASB Interpretation No. 48 (FIN 48), Accounting for Uncertainty in Income Taxes—an Interpretation of FASB
Statement No. 109." Under SFAS No. 109, deferred tax assets and liabilities are determined based on differences between financial reporting and tax reporting
bases of assets and liabilities and are measured using enacted tax rates and laws that are expected to be in effect when the differences are expected to reverse.
Realization of deferred tax assets is dependent upon future earnings, the timing and amount of which are uncertain.
Upon adoption of FIN 48, the Company did not recognize an increase or a decrease in the liability for net unrecognized tax benefits, which would be
accounted for through retained earnings. FIN 48 contains a two-step approach to recognizing and measuring uncertain tax positions. The first step is to
evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be
sustained upon tax authority examination, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit
as the largest amount that is more than 50% likely of being realized upon ultimate settlement.
The Company's policy is to include interest and penalties related to unrecognized tax benefits, if any, within the provision for taxes in the consolidated
statements of operations.
Comprehensive Loss
The Company has no material components of other comprehensive income or loss and, accordingly, the comprehensive loss is the same as the net loss
for all periods presented.
Fair Value of Financial Instruments
Carrying amounts of certain of the Company's financial instruments including cash and cash equivalents, accounts receivable, accounts payable, and
accrued expenses approximate their fair value because of their short maturities. Available-for-sale marketable securities are reported at their fair value.
Business Concentrations and Credit Risk
Financial instruments that potentially subject the Company to a concentration of credit risk principally consist of cash, cash equivalents, short-term
investments, and trade receivables. The Company currently invests the majority of its cash in money market funds and maintains them with one financial
institution with a high credit rating. The Company also invests in auction rate securities. See Note 23. "Subsequent Events". As part of its cash management
process, the Company performs periodic evaluations of the relative credit ratings of these financial institutions and issuers of the securities the Company
owns. The Company has not experienced any credit losses on its cash, cash equivalents, or short-term investments. The Company is exposed to credit risk on
these instruments to the extent of the amount recorded on the consolidated balance sheet at January 31, 2008.
The majority of the Company's customers are concentrated in the United States. The Company is subject to a minimal amount of credit risk related to
service revenue contracts as these are primarily obtained through credit card sales. DIRECTV represented approximately 8%, 10%, and 14%, of net revenues
and 17%, 22%, and 24% of net accounts receivable for the fiscal years ended January 31, 2008, 2007, and 2006, respectively. The Company sells its TiVo-
enabled DVR to retailers under customary credit terms and generally requires no collateral. One retailer generated 5%, 12%, and 29% of the Company's net
revenues and 18%, 19%, and 21% of the net accounts receivable for the fiscal years ended January 31, 2008, 2007, and 2006, respectively. Additionally,
Comcast represented 38%, 0%, and 6% of the Company's net accounts receivable for the fiscal year ended January 31, 2008, 2007, and 2006, respectively.
The Company is dependent on sole suppliers for several key components, assemblies, and services. The Company has long-term agreements with
Tribune Media Services, the sole supplier of the Company's programming guide data for the TiVo service. The Company does not have a long-term written
supply agreement with Broadcom, the sole supplier of the system controller for our DVR. In instances where a supply agreement does not exist and suppliers
fail to perform their obligations, the Company may be unable to find alternative suppliers or deliver its products and services to its customers on time, if at all.
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