SIGNIFICANT ACCOUNTING POLICIES

Accounting Estimates

Preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and reported amounts of net revenue and expenses during the reporting period. Financial statement line items that include significant estimates consist of goodwill, net intangibles, accrued restructuring costs, certain tax accounts, certain accrued liabilities and the allowance for uncollectible accounts receivable. Changes in the facts or circumstances underlying these estimates could result in material changes, and actual results could differ from those estimates. These changes in estimates are recognized in the period they are realized.

Principles of Consolidation and Basis of Presentation

The financial statements include our accounts consolidated with our wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. Unless otherwise stated, current and prior period results in our consolidated statements of operations and cash flows and these notes reflect our results from continuing operations and exclude the effect of current and prior period discontinued operations. See Note 4 to our consolidated financial statements for additional information and related disclosures regarding our discontinued operations. Certain prior year amounts have been reclassified to conform to current year presentation.

Revision to Prior Period Financial Statements

During 2014, we identified a prior period error originating in 2010 that was carried forward into the years ended December 31, 2013, 2012 and 2011. The prior period error relates to our 2010 sale of PGiSend and the loss from discontinued operations related to the sale.

During 2010, we recorded our PGiSend sale and loss from discontinued operations of $12.3 million. In 2014, after analyzing our historical tax records related to 2010, we determined that upon the sale of PGiSend, the allocation of tax attributes required by the Treasury Regulations under Internal Revenue Code of 1986, as amended, or tax code Section 1502 was incorrect, resulting in a $1.9 million overstatement of deferred tax assets retained by us. The offset to this overstatement was an understatement of deferred tax assets recorded within discontinued operations, resulting in an understatement of the net loss on disposal recorded in 2010. Subsequent to 2010, retained earnings and the deferred tax assets were misstated by $1.9 million with no effect on reported results from continuing operations.

In evaluating whether our previously issued consolidated financial statements were materially misstated, we considered the guidance in ASC Topic 250, Accounting Changes and Error Corrections, ASC Topic 250-10-S99-1, Assessing Materiality, and ASC Topic 250-10-S99-2, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements. We concluded this error was not material to any of the prior reporting periods; and therefore, amendments of previously filed reports are not required. As such, the revisions for prior period corrections are reflected in the comparative financial information for the applicable prior periods presented herein. The effects of the prior period error on the consolidated financial statements are as follows (in thousands):



Revised Consolidated Balance Sheet (in thousands):
				December 31, 2013
				As previously reported			Adjustments			As revised
LONG-TERM LIABILITIES
	Deferred income taxes, net			$	18,881		$	1,909		$	20,790
		Total long-term liabilities		320,995			1,909			322,904
SHAREHOLDERS' EQUITY
	Accumulated deficit			(196,680		)	(1,909		)	(198,589		)
		Total shareholders' equity		272,885			(1,909		)	270,976
			Total liabilities and shareholders' equity	$	698,108		$	—		$	698,108

Cash and Equivalents and Restricted Cash

Cash and equivalents consist of cash on hand. Cash balances that are legally restricted as to usage or withdrawal are separately included in “Prepaid expenses and other current assets” on our consolidated balance sheets. At December 31, 2014 and 2013, we had $0.4 million and $0.0 million of restricted cash, respectively.

Accounts Receivable and Allowance for Doubtful Accounts

Included in accounts receivable at December 31, 2014 and 2013 was earned but unbilled revenue of approximately $5.1 million and $5.7 million, respectively, which results from non-calendar month billing cycles and the one-month lag in billing of certain of our services. Earned but unbilled revenue is billed within 30 days. Provision for doubtful accounts was approximately $0.5 million, $0.5 million and $1.1 million in 2014, 2013 and 2012, respectively. Write-offs against the allowance for doubtful accounts were $0.7 million, $0.6 million and $0.9 million in 2014, 2013 and 2012, respectively. Our allowance for doubtful accounts represents reserves for receivables that reduce accounts receivable to amounts expected to be collected. The allowance for doubtful accounts was approximately $0.6 million, $0.8 million and $0.8 million as of December 31, 2014, 2013 and 2012, respectively. Management uses significant judgment in estimating uncollectible amounts. In estimating uncollectible amounts, management considers factors such as historical and anticipated customer payment performance and industry-specific economic conditions. Using these factors, management assigns reserves for uncollectible amounts by accounts receivable aging categories to specific customer accounts.

Property and Equipment

Property and equipment are recorded at cost. Depreciation is recorded under the straight-line method over the estimated useful lives of the assets commencing when the assets are placed in service. The estimated useful lives are five to seven years for furniture and fixtures, two to five years for software and three to five years for computer servers and Internet and telecommunications equipment. The cost of installation of equipment is capitalized, as applicable. Amortization of assets recorded under capital leases is included in depreciation. Assets recorded under capital leases and leasehold improvements are depreciated over the shorter of their useful lives or the term of the related lease.

Research and Development

Research and development expenses primarily related to developing new services, features and enhancements to existing services that do not qualify for capitalization are expensed as incurred.

Software Development Costs

We capitalize certain costs incurred to develop software features used as part of our service offerings within “Property and Equipment, Net” on our consolidated balance sheets. For the years ended December 31, 2014, 2013 and 2012, we capitalized approximately $22.0 million, $17.5 million and $15.3 million, respectively, of these costs. We amortize these capitalized costs on a straight-line basis over the estimated life of the related software, not to exceed five years. Depreciation expense recorded for developed software for the years ended December 31, 2014, 2013 and 2012, was approximately $14.6 million, $13.7 million and $12.1 million, respectively.

Goodwill

Goodwill is subject to an impairment assessment performed at the reporting unit level, at least annually and more frequently if indicators of impairment are identified. Our reporting units are our operating segments: North America, Europe and Asia Pacific. We utilize December 31 as our annual date to perform the assessment and adopted the qualitative goodwill impairment assessment standard, applied as of December 31, 2012. Under this standard, management evaluates whether it is more likely than not that the carrying value of a reporting unit exceeds its fair value. Factors utilized in this qualitative assessment include the results of the most recent impairment test, economic factors impacting the conferencing and collaboration industry, current and long-range forecasted financial results and changes in the strategic outlook of the reporting unit. If it is determined that fair value more likely than not exceeds carrying value, then goodwill is not considered impaired and no quantitative impairment test is required for that reporting unit. If it is more likely than not that carrying value exceeds fair value, we proceed with the quantitative two-step impairment assessment. The first step is to identify potential goodwill impairment by comparing the calculated estimated fair value of the reporting unit to its carrying amount. The second step measures the amount of the impairment based upon a comparison of “implied fair value” of goodwill with its carrying amount.

As a result of the acquisitions made in 2014, we elected to perform step one of the quantitative impairment test for each of our reporting units for our December 31, 2014 assessment. Based on our quantitative assessment this year, the estimated fair value of our North America, Europe and Asia Pacific reporting units substantially exceeded their respective carrying values. No impairment of goodwill was identified in any of the years ended December 31, 2014, 2013 and 2012.

Valuation of Long-Lived Assets

We evaluate the carrying values of long-lived assets when significant adverse changes in the economic value of these assets require an analysis, including property and equipment and other intangible assets. A long-lived asset is considered impaired when its fair value is less than its carrying value. In that event, a loss is calculated based on the amount the carrying value exceeds the future cash flows, as calculated under the best-estimate approach, of such asset. We believe that long-lived assets in our consolidated balance sheets are appropriately valued. Asset impairments were $5.0 million, $1.2 million and $0.9 million during 2014, 2013 and 2012, respectively, and are recognized as “Asset impairments” in our consolidated statements of operations.

Investments

In March 2013, we invested $1.0 million in a privately-held cloud solutions provider. This investment is accounted for under the cost method and is periodically assessed for other-than-temporary impairment using financial results, economic data and other quantitative and qualitative factors deemed applicable. In the event an other-than-temporary impairment occurs, an impairment loss equal to the difference between the cost basis and the fair value would be recognized. In September 2012, we invested $1.0 million in a privately-held cloud service marketplace company by purchasing a convertible promissory note which was accounted for under the cost method until it was repaid to us in January 2014 for the principal balance plus accrued interest at an annual rate of 8%.

Our cost method investments had a total carrying value of $1.1 million and $2.1 million as of December 31, 2014 and 2013, respectively. Our investment in the privately-held cloud solutions provider was included as a component of “Other assets” in our consolidated balance sheets for each period presented, while the convertible promissory note was included as a component of “Prepaid expenses and other current assets” as of December 31, 2013.

In June 2011, we invested approximately $1.0 million in a privately-held conferencing company. During December 2013, this investment changed from a historical cost investment to an available-for-sale asset when that company’s shares began trading publicly on a foreign stock exchange. The fair value of this investment was based on the quoted price of our shares of such company on that foreign exchange at each measurement date. This investment is also subject to fluctuations in foreign currency exchange rates. Any related gains or losses related to the market value of the shares or fluctuations in foreign currency are excluded from earnings until realized and reported as a component of “Accumulated other comprehensive income (loss)” in our consolidated balance sheets. In February 2014, we sold 50% of our investment for approximately $1.0 million realizing a gain of $0.5 million. This gain was reflected in "Other, net" in our consolidated statements of operations. After the effects of foreign currency exchange rate fluctuations and adjustments to the quoted market value, the available-for-sale investment had a market value of $0.3 million and $3.5 million as of December 31, 2014 and 2013, respectively, which was included as a component of “Prepaid expenses and other current assets” in our consolidated balance sheets.

Revenue Recognition

We recognize revenue when persuasive evidence of an arrangement exists, services have been rendered, the price to the buyer is fixed or determinable and collectability is reasonably assured. Revenue from continuing operations consists primarily of usage fees generally based on per minute methods.

Our SaaS revenue consists of five primary components associated with our next-generation collaboration solutions:


•	Subscription-based license fees associated with fixed-period minimum revenue commitments related to our iMeetand GlobalMeetproducts. These subscription-based fees are considered service arrangements per the authoritative guidance; accordingly, fees related to subscription agreements are recognized ratably over the contract term, which is typically 12 to 24 months;

•

Subscription- and event-based fees associated with commitments for our self-service webcasting and event streaming product and our team workspace and project management platform; Subscription-based fees are considered service arrangements per the authoritative guidance; accordingly, fees related to subscription agreements are recognized ratably over the contract term, which is typically 12 months, and event-based fees are recognized when the event occurs;

•

Per minute usage fees generated through the use of iMeet and GlobalMeet. These usage fees are generated if a customer contracts for the use of GlobalMeet on a per-minute basis, or if a customer elects to use either minutes in excess of the contractual amount allowed in a subscription agreement or of a type not included in the arrangement. This revenue is recognized as incurred by the customer, consistent with our other per minute usage fees;


•	Certain set-up fees, which are recognized ratably over the contract term or the expected customer life, whichever is longer; and


•	Revenue from our IP-based conferencing products, which deliver conferencing services across an enterprise customer’s existing network infrastructure, thereby eliminating third-party variable network costs. This revenue is recognized as incurred by the customer, consistent with our other per minute usage fees.

Unbilled revenue consists of earned but unbilled revenue that results from non-calendar month billing cycles and the one-month lag time in billing related to certain of our services. Deferred revenue consists of payments made by customers in advance of the time services are rendered. Incremental direct costs incurred related to deferred revenue are deferred over the life of the contract and are recorded in “Prepaid expenses and other current assets” in our consolidated balance sheets.

USF Charges

In accordance with FCC rules, we are required to contribute to the federal USF for some of our solutions, which we recover from our applicable customers and remit to the USAC. We present the USF charges that we collect and remit on a net basis, with both collections from our customers and the amounts we remit, recorded in "Net revenue." Had we presented USF charges on a gross basis, net revenue and cost of revenue would have been $24.9 million, $27.3 million and $32.0 million higher for the years ended December 31, 2014, 2013 and 2012, respectively.

Resold Services

As part of our product portfolio, we resell certain third-party collaboration products primarily in our North American segment. Revenue associated with these resold services totaled $61.0 million, $65.1 million and $69.7 million for the years ended December 31, 2014, 2013 and 2012, respectively. Included in these amounts is revenue acquired in our 2013 ACT acquisition totaling $3.9 million and $1.4 million for the years ended December 31, 2014 and 2013, respectively. Such revenue is included in our Consolidated Statements of Operations on a gross basis, with revenue included in “Net revenue” and costs included in “Cost of revenue.”

Foreign Currency Translation

The assets and liabilities of subsidiaries with a functional currency other than the U.S. Dollar are translated at rates of exchange existing at our consolidated balance sheet dates. Revenue and expenses are translated at average rates of exchange prevailing during the year. The resulting translation adjustments are recorded in the “Accumulated other comprehensive gain” component of shareholders’ equity. In addition, certain of our intercompany loans with foreign subsidiaries are considered to be permanently invested for the foreseeable future. Therefore, foreign currency exchange gains and losses related to these permanently invested balances are recorded in the “Accumulated other comprehensive income” component of shareholders’ equity in our consolidated balance sheets.

Treasury Stock

All treasury stock transactions are recorded at cost, and all shares of treasury stock repurchased are retired. During the year ended December 31, 2014, we repurchased approximately 1.9 million shares of our common stock in the open market for approximately $24.6 million at an average price of $12.93 per share, pursuant to our board-approved stock repurchase program. During the year ended December 31, 2013, we repurchased approximately 0.1 million shares of our common stock in the open market for approximately $1.4 million at an average price of $10.54 per share, pursuant to our prior board-approved stock repurchase program.

During the years ended December 31, 2014 and 2013, we redeemed 209,721 and 215,387 shares, respectively, of our common stock to satisfy certain of our employees’ tax withholdings due upon the vesting of their restricted stock grants and remitted approximately $2.5 million and $2.7 million, respectively, to the Internal Revenue Service on our employees’ behalf.

Preferred Stock

We have 5.0 million shares of authorized $0.01 par value preferred stock, none of which are issued or outstanding. Under the terms of our amended and restated articles of incorporation, our board of directors is empowered to issue preferred stock without shareholder action.

Income Taxes

Income taxes are determined under the asset and liability method as required by ASC 740, “Income Taxes”. Under this method, deferred tax assets and liabilities are recognized based upon the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary items are expected to be recovered or settled. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts more likely than not to be realized. To the extent we establish a valuation allowance or increase this allowance in a period, an expense is recorded within the income tax provision in our consolidated statements of operations. Under current accounting principles, the impact of an uncertain income tax position on the income tax return must be recognized at the largest amount that is more likely than not to be sustained upon audit by the relevant taxing authority. Accrued interest related to uncertain tax positions is recorded as "Interest expense" in our consolidated statements of operations. See Note 16 to our consolidated financial statements for additional information and related disclosures regarding our income taxes.

Restructuring Costs

Restructuring reserves are based on certain estimates and judgments related to severance and exit costs, contractual obligations and related costs and are recorded as “Restructuring costs” in our consolidated statements of operations. See Note 3 to our consolidated financial statements for additional information and related disclosures regarding our restructuring costs.

Acquisition-related Costs

Acquisition-related costs reflected in our consolidated statements of operations include, but are not limited to, transaction costs such as banking, legal, accounting and other professional fees directly related to acquisitions, termination and related costs for transitional and certain other employees, integration-related professional fees and other post-business combination expenses associated with our business acquisitions.

The following table summarizes acquisition-related costs incurred during the years ended December 31, 2014 and 2013 (in thousands):



	2014			2013
Professional fees	$	4,203		$	2,439
Release of indemnification asset	1,472			1,129
Integration-related costs	3,816			1,824
Earn-out liability adjustment	(1,329		)	—
Total acquisition-related costs	$	8,162		$	5,392

For further discussion of the indemnification asset and related costs see Notes 12 and 16 to our consolidated financial statements.

Advertising Costs

We expense production costs associated with an advertisement the first time the advertising takes place. All other advertising-related costs are expensed as incurred. We expense advertising costs as advertising space or airtime is used. Total advertising expense in 2014, 2013 and 2012 was $12.3 million, $6.1 million and $8.9 million, respectively. We had no prepaid advertising as of December 31, 2014 and 2013.

Legal Contingencies

We are involved from time to time in certain legal matters and subject to other claims as disclosed in Note 14 to our consolidated financial statements. We accrue an estimate for legal contingencies when we determine that it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. These estimates are developed in consultation with outside counsel handling these matters and based upon an analysis of potential results, assuming a combination of litigation and settlement strategies.

New and Recently Adopted Accounting Pronouncements

In April 2014, the FASB issued ASU 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. Under ASU 2014-08, only disposals representing a strategic shift in operations should be presented as discontinued operations. Those strategic shifts should have a major effect on the organization's operations and financial results. Additionally, ASU 2014-08 requires expanded disclosures about discontinued operations that will provide financial statement users with more information about the assets, liabilities, income and expenses of discontinued operations. ASU 2014-08 is effective for fiscal and interim periods beginning on or after December 15, 2014. We plan to adopt the provisions of this new accounting standard at the beginning of fiscal year 2015, and we are currently assessing the impact on our consolidated financial position, results of operations and related disclosures.

In May 2014, the Financial Accounting Standards Board issued ASU 2014-09, Revenue from Contracts with Customers. This standard outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. The SEC has indicated that it plans to review and update the revenue recognition guidance in SAB Topic 13 when the ASU is issued. The extent to which the ASU’s guidance will affect us as it relates to revenue recognition will depend on whether the SEC removes or amends the guidance in SAB Topic 13 to be consistent with the new revenue standard. In addition, the ASU provides guidance on accounting for certain revenue-related costs including, but not limited to, when to capitalize costs associated with obtaining and fulfilling a contract. ASU 2014-09 provides companies with two implementation methods. Companies can choose to apply the standard retrospectively to each prior reporting period presented (full retrospective application) or retrospectively with the cumulative effect of initially applying the standard as an adjustment to the opening balance of retained earnings of the annual reporting period that includes the date of initial application (modified retrospective application). This guidance is effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period, and early application is not permitted. We are in the process of evaluating the impact that the updated standard will have on our consolidated financial position, results of operations and related disclosures.