iRobot 2005 Annual Report Download - page 66

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iROBOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
Impairment of Long-Lived Assets
The Company periodically evaluates the recoverability of long-lived assets whenever events and changes
in circumstances indicate that the carrying amount of an asset may not be fully recoverable. When indicators
of impairment are present, the carrying values of the assets are evaluated in relation to the operating
performance and future undiscounted cash flows of the underlying business. The net book value of the
underlying asset is adjusted to fair value if the sum of the expected discounted cash flows is less than book
value. Fair values are based on estimates of market prices and assumptions concerning the amount and timing
of estimated future cash flows and assumed discount rates, reflecting varying degrees of perceived risk. There
were no impairment charges recorded during any of the periods presented.
Research and Development
Costs incurred in the research and development of the Company's products are expensed as incurred.
Internal Use Software
The Company capitalizes costs associated with the development and implementation of software obtained
for internal use in accordance with American Institute of Certified Public Accountants Statement of Position
98-1, Accounting for Costs of Computer Software Developed or Obtained for Internal Use (""SOP 98-1''). At
December 31, 2005 and 2004, the Company had $1.3 million and $0.9 million respectively, of internal costs
related to enterprise-wide software included in fixed assets. Capitalized costs are being amortized over the
assets' estimated useful lives. The Company has recorded $0.2 million, $0.2 million and $0.1 million of
amortization expense for the years ended December 31, 2005, 2004 and 2003, respectively.
Concentration of Credit Risk and Significant Customers
The Company maintains its cash in bank deposit accounts at high quality financial institutions. The
individual balances, at times, may exceed federally insured limits. At December 31, 2005 and 2004, the
Company exceeded the insured limit by $74.3 million and $19.2 million, respectively.
Financial instruments which potentially expose the Company to concentrations of credit risk consist of
accounts receivable. Management believes its credit policies are prudent and reflect normal industry terms and
business risk. At December 31, 2005 and 2004, 24% and 15%, respectively, of the Company's accounts
receivable were due from the federal government. At December 31, 2005, two additional customers each
accounted for 12% of the Company's account receivable balance. At December 31, 2004, two additional
customers accounted for 21% and 14% of the Company's accounts receivable balance, respectively. For the
years ended December 31, 2005, 2004, and 2003 revenue from one customer, the federal government,
represented 28%, 20% and 12% of total revenue, respectively.
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