iRobot 2007 Annual Report Download - page 108

As of December 29, 2007, the unamortized fair value of all restricted stock units was $429,000. The Company
expects to recognize associated stock-based compensation expense of $106,000, $113,000, $123,000 and $87,000
in 2008, 2009, 2010 and 2011, respectively.
Advertising Expense
The Company expenses advertising costs as they are incurred. During the years ended December 29, 2007,
December 30, 2006 and December 31, 2005 advertising expense totaled $15.9 million, $14.3 million and
$10.5 million, respectively.
Income Taxes
In June 2006, the FASB issued FASB Interpretation No. (“FIN”) 48, Accounting for Uncertainty in Income
Taxes — An Interpretation of FASB Statement No. 109, which prescribes a recognition threshold and measurement
attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a
tax return. FIN 48 is effective for fiscal years beginning after December 15, 2006. Accordingly, the Company
adopted FIN 48 beginning December 31, 2006 and the impact of adoption on its opening balance of retained
earnings was zero. As of the beginning of fiscal year 2007, the Company had no material unrecognized tax benefits
and no material unrecognized tax benefits were recorded in the fiscal year ended December 29, 2007. The Company
recognizes interest and penalties related to unrecognized tax benefits in its tax provision and there were no accrued
interest or penalties as of December 29, 2007, December 30, 2006 or December 31, 2005.
The Company is subject to taxation in the United States and various states and foreign jurisdictions. The statute
of limitations for assessment by the IRS and state tax authorities is closed for fiscal years prior to December 31,
2004, although carryforward attributes that were generated prior to fiscal year 2004 may still be adjusted upon
examination by the IRS or state tax authorities if they either have been or will be used in a future period. There are
currently no federal or state audits in progress.
Deferred taxes are determined based on the difference between the financial statement and tax basis of assets
and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse. Valuation
allowances are provided if based upon the weight of available evidence, it is more likely than not that some or all of
the deferred tax assets will not be realized.
The Company monitors the realization of its deferred tax assets based on changes in circumstances, for
example recurring periods of income for tax purposes following historical periods of cumulative losses or changes
in tax laws or regulations. The Company’s income tax provisions and its assessment of the realizability of its
deferred tax assets involve significant judgments and estimates.
In fiscal 2007, the Company completed an analysis of historical and projected future profitability which
resulted in the full release of the valuation allowance relating to federal deferred tax assets. The Company continues
to maintain a valuation allowance against state deferred tax assets due to less certainty of their realizability given the
shorter expiration period associated with these state deferred tax assets and the generation of state tax credits in
excess of the state tax liability. At December 29, 2007, the Company has total deferred tax assets of $12.9 million
and a valuation allowance of $2.7 million resulting in a net deferred tax asset of $10.2 million.
Comprehensive Income (Loss)
SFAS No. 130, Reporting Comprehensive Income, establishes standards for the reporting and display of
comprehensive income (loss) and its components in financial statements. The Company’s comprehensive income
(loss) is equal to the Company’s net income (loss) for all periods presented.
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iROBOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)