iRobot 2007 Annual Report Download - page 102

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Property and Equipment
Property and equipment are recorded at cost and consist primarily of computer equipment, business appli-
cations software and machinery. Depreciation is computed using the straight-line method over the estimated useful
lives as follows:
Estimated
Useful Life
Computer and research equipment ...................................... 3years
Furniture ......................................................... 5
Machinery ........................................................ 2-5
Tooling .......................................................... 2
Business applications software ......................................... 5
Capital leases and leasehold improvements ................................ Termoflease
Expenditures for additions, renewals and betterments of plant and equipment are capitalized. Expenditures for
repairs and maintenance are charged to expense as incurred. As assets are retired or sold, the related cost and
accumulated depreciation are removed from the accounts and any resulting gain or loss is credited or charged to
operations.
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 Decem-
ber 29, 2007 and December 30, 2006, the Company had $4.8 million and $3.6 million respectively, of 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 $0.7 million, $0.6 million and $0.2 million of amortization
expense for the years ended December 29, 2007, December 30, 2006 and December 31, 2005, 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 29, 2007 and December 30, 2006, the
Company exceeded the insured limit by $25.3 million and $6.1 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 29, 2007 and December 30, 2006, 15% and 12% respectively, of the Company’s
accounts receivable were due from the federal government. At December 29, 2007 two additional customers
68
iROBOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)