WebEx 2002 Annual Report Download - page 43

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WEBEX COMMUNICATIONS, INC.
December 31, 2002, 2001 and 2000
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(In thousands except share and per share amounts)
(m) Impairment of Long-Lived Assets
WebEx evaluates its long-lived assets and certain identifiable intangibles for impairment whenever events
or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability
of assets to be held and used is measured by a comparison of the carrying amount of an asset to future
undiscounted net cash flows expected to be generated by the asset. If the carrying value exceeds the cash flows,
such assets are considered to be impaired, and the impairment to be recognized is measured by the amount by
which the carrying amount of the assets exceeds the fair value of the assets. Assets held for sale are reported at
the lower of the carrying amount of the assets or fair value less costs to sell.
(n) Income Taxes
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences between the financial statement carrying
amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit
carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to be recovered or settled. The
effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that
includes the enactment date. A valuation allowance is recorded against deferred tax assets if it is more likely than
not that all or a portion of the deferred tax assets will not be realized.
(o) Equity-Based Compensation
The Company accounts for stock awards to employees and directors in accordance with the intrinsic value
method of Accounting Principles Board Opinion No. 25 (APB 25), “Accounting for Stock Issued to Employees,
and related interpretations”. Under this method, compensation expense for fixed plan stock options is recorded
on the date of the grant only if the current fair value of the underlying stock exceeds the exercise price. Deferred
stock-based compensation is amortized over the vesting period using the method described in FASB
Interpretation No. 28 (FIN 28).
The Company accounts for stock awards to non-employees in accordance with the provisions of SFAS 123,
“Accounting for stock-based compensation”, and Emerging Issues Task Force (EITF) Issue No. 96-18,
“Accounting for Equity Instruments That are Issued to Other Than Employees for Acquiring, or in Conjunction
with Selling Goods or Services”. The equity-based compensation expense for options granted to non-employees
is re-measured for changes in their fair value until the underlying options vest.
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