iRobot 2008 Annual Report Download - page 114

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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 27, 2008 and December 29, 2007, the Company had $5.1 million and $4.8 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 $0.8 million, $0.7 million and $0.6 million of
amortization expense for the years ended December 27, 2008, December 29, 2007 and December 30, 2006,
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 27, 2008 and December 29, 2007 the
Company exceeded the insured limit by $40.4 million and $25.3 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 27, 2008 and December 29, 2007, 26% and 15% respectively, of the Company’s
accounts receivable were due from the federal government. At December 29, 2007 two additional customers
accounted for 13% and 12%, respectively, of the Company’s accounts receivable balance. For the years ended
December 27, 2008, December 29, 2007, and December 30, 2006 revenue from one customer, the federal
government, represented 40%, 35% and 34% of total revenue, respectively.
Foreign Currency Forward Contracts
In late 2007, the Company entered into several foreign currency forward contracts to sell Canadian dollars for
United States dollars and has continued this practice throughout 2008. The Company’s objective in entering into
these contracts was to reduce foreign currency exposure to appreciation or depreciation in the value of its Canadian
dollar based accounts receivable balances by partially offsetting a portion of such exposure with gains or losses on
the forward contracts.
The Company accounted for these financial derivatives in accordance with SFAS No. 133, Accounting for
Derivative Instruments and Hedging Activities, as amended. These foreign currency contracts did not qualify for
hedge accounting under SFAS No. 133. Accordingly, the foreign currency forward contracts were marked-to-
market and recorded at fair value with unrealized gains and losses reported along with foreign currency gains or
losses in the caption “other income (expense), net” on the Company’s consolidated statements of operations.
Stock-Based Compensation
Effective January 1, 2006, the Company adopted the provisions of SFAS No. 123(R), Share-Based Payment,
which establishes accounting for equity instruments exchanged for employee services. Under the provisions of
SFAS No. 123(R), share-based compensation cost is measured at the grant date, based on the calculated fair value of
the award, and is recognized as an expense over the employee’s requisite service period (generally the vesting period
of the equity grants). Prior to January 1, 2006, the Company accounted for share-based compensation to employees in
accordance with Accounting Principles Board Opinion (“APB”) No. 25, Accounting for Stock Issued to Employees,
and related interpretations. The Company also followed the disclosure requirementsof SFAS No. 123, Accounting for
Stock-Based Compensation, as amended by SFAS No. 148, Accounting for Stock-Based Compensation — Transition
and Disclosure. The Company adopted the prospective transition method as provided by SFAS No. 123(R) and,
accordingly financial statement amounts for the prior periods presented in this Annual Report on Form 10-K have not
been restated to reflect the fair value method of expensing share-based compensation.
66
iROBOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)