TiVo 2013 Annual Report Download - page 79

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The Company accrues for the expected material and labor costs required to provide warranty services on its hardware products. The
Company’s warranty reserve liability is calculated as the total volume of unit sales over the warranty period, multiplied by the expected rate of
warranty returns (based on historical experience) multiplied by the estimated cost to replace or repair the customers’ product returns under
warranty.

The Company accounts for income taxes under the asset and liability method. 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.
TiVo takes 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.

The Company’s business is concentrated primarily in the United States and is dependent on discretionary consumer spending.
Continued uncertainty or adverse changes in the economy could lead to additional significant declines in discretionary consumer spending,
which, in turn, could result in further declines in the demand for the TiVo service and TiVo-enabled DVRs. Decreases in demand for the
Company’s products and services, particularly during the critical holiday selling season, could have an adverse impact on its operating
results and financial condition. Uncertainty and adverse changes in the economy could also increase the risk of losses on the Company’s
investments, increase costs associated with developing and producing its products, increase TiVo’s churn rate per month, increase the cost
and decrease the availability of potential sources of financing, and increase the Company’s exposure to losses from bad debts, any of which
could have an adverse impact on the Company’s financial condition and operating results.
Financial instruments that potentially subject the Company to a concentration of credit risk principally consist of cash, cash equivalents,
short-term and long-term investments, and trade receivables. The Company currently invests the majority of its cash in high-grade
government and corporate debt and maintains them with two financial institutions with high credit ratings. 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 significant credit losses on its cash, cash equivalents, or short-term and long-term
investments.
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. The Company sells its TiVo-enabled DVRs
to retailers under customary credit terms and generally requires no collateral. The Company's significant revenue concentrations as of
January 31, 2014, 2013, and 2012 were as follows:

  
DISH 11%15%14%
Google and Cisco in connection with Motorola/Cisco settlement 11% * *
* Less than 10%.
The Company’s accounts receivable concentrations as of January 31, 2014 and 2013 were as follows:

 
AT&T 23%24%
Suddenlink 13%23%
Com Hem 12% *
76