TiVo 2008 Annual Report Download - page 66

Table of Contents
Short-term and long-term Investments
Short-term and long-term investments are classified as available-for-sale and are carried at fair value. The Company's short-term and long-term
investments are reviewed each reporting period for declines in value that are considered to be other-than temporary and, if appropriate, the investments are
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 unrealized losses deemed temporary are included in accumulated
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.
Receivables
Accounts receivable consist primarily of receivables from Retailers, Cable and Satellite companies, as well as individual consumers and relate to our
subscription, technology, and hardware revenues. Additionally, amounts due from banks for customer credit card, debit card and EBT transactions that take in
excess of three days to process are classified as accounts receivable.
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 allowances based on the age of the receivable. In determining the allowance, 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:
Fiscal year ended:
January 31, 2009 $ 1,194 $ 471 $ (895) $ 770
January 31, 2008 $ 271 $ 1,059 $ (136) $ 1,194
January 31, 2007 $ 56 $ 718 $ (503) $ 271
(*)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. Subsequently, actual sales of the Company's standard
definition DVRs have exceeded original projections due to changing market conditions. As a result, during the years ended January 31, 2008 and January 31,
2009, the Company's gross margin was positively impacted by $4.8 million and $4.9 million, respectively, from the sale of inventory that was previously
impaired in fiscal years 2007 and 2008 as excess and obsolete inventory and excess non-cancelable purchase commitments. As of January 31, 2009, the
Company maintained a $3.6 million inventory reserve as a result of these prior inventory impairment charges. In accordance with Staff Accounting Bulletin
(SAB) Topic 5-BB and Accounting Research Bulletin (ARB) 43 Chapter 4, Inventory Pricing, even if our current sales projections exceed our original
projections, the inventory reserves are not reversed until the previously impaired inventory is sold or scrapped.
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