BASIS OF PRESENTATION

6 Months Ended

Jan. 31, 2012

BASIS OF PRESENTATION [Abstract]

Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block]

BASIS OF PRESENTATION

These condensed consolidated financial statements of EasyLink Services International Corporation (referred to as “EasyLink,” the “Company,” “we,” “our” or “us”) have been prepared by the Company, without audit, pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) and, in the opinion of the Company, include all adjustments (which are normal and recurring in nature) necessary to present fairly the financial position of the Company at January 31, 2012 and July 31, 2011, and the results of operations for the three and six months ended January 31, 2012 and  2011 and the cash flows for the six months ended January 31, 2012 and 2011. Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted pursuant to such SEC rules and regulations. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s annual report on Form 10-K for the fiscal year ended July 31, 2011.

Operating results for the three and six months ended January 31, 2012 are not necessarily indicative of the results that may be expected for the fiscal year ending July 31, 2012 or any future period.

(a) Principles of consolidation and basis of presentation

The consolidated financial statements include the accounts of EasyLink and its wholly-owned subsidiaries. All significant intercompany transactions have been eliminated in consolidation. The Company's fiscal year ends July 31. References herein to Fiscal 2012 and Fiscal 2011 refer to the fiscal years ended July 31, 2012 and 2011, respectively.

(b) Use of estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenue and expense during the reporting period. Actual results could differ from those estimates. Significant accounting estimates used in the preparation of the Company's consolidated financial statements include the fair value of equity securities underlying stock based compensation, the collectability of receivables, the realizability of deferred tax assets, the carrying value of goodwill, intangible assets and long-lived assets and depreciation and amortization.

(c) Foreign Currency Translation

Assets and liabilities of the Company's foreign subsidiaries are translated at the rate of exchange existing at each reporting period, with revenues, expenses, and cash flows translated at the average of the monthly exchange rates. Adjustments resulting from translation of the financial statements are recorded as a component of accumulated other comprehensive income (loss) (“AOCI”). Also included in AOCI are the effects of exchange rate changes on intercompany balances of a long-term nature. The changes in accumulated foreign currency translation were primarily attributable to the impact of translation of the net assets of the Company's international operations, primarily denominated in Japanese Yen, Pounds Sterling and Euros. As of January 31, 2012 and July 31, 2011, foreign currency translation adjustment balances of $3.0 million and $2.1 million, respectively, were reflected in the accompanying Condensed Consolidated Balance Sheets (Unaudited) in AOCI. Exchange gains (losses) on foreign currency transactions aggregating to $(0.5) million and $(0.8) million for the three and six months ended January 31, 2012 and ($0.2) million and $0.1 million for the three and six months ended January 31, 2011, respectively, are included in Other income (expense), in the accompanying Condensed Consolidated Statements of Operations (Unaudited).

(d) Concentrations of Credit Risk and Major Customers

Financial instruments that potentially subject the Company to concentrations of credit risk primarily consist of cash and accounts receivable. The Company maintains its cash in bank deposit accounts with institutions of high credit quality, the balances of which, at times, may exceed the FDIC insurance limits. Exposure to credit risk is reduced by placing such deposits with major financial institutions and monitoring their credit ratings. All accounts receivable are unsecured.  The Company believes that any credit risk associated with receivables is minimal due to the number and creditworthiness of its customers. Receivables are stated at estimated net realizable value, which approximates fair value.

For the three and six months ended January 31, 2012 and 2011, no single customer accounted for more than 10% of revenue. No single customer accounted for more than 10% of accounts receivable at January 31, 2012 and July 31, 2011.

Approximately 39% and 40% of the Company’s revenues during the three and six months ended January 31, 2012, respectively, and 44% and 39% of the Company’s revenues during the three and six months ended January 31, 2011, respectively, occurred outside of the U.S.

(e) Recently Adopted Accounting Pronouncements

On June 16, 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income (“ASU 2011-05”). This update amends Accounting Standards Codification (“ASC”) Topic 220, Comprehensive Income, to provide that total comprehensive income will be reported in one continuous statement or two separate but consecutive statements of financial performance. Presentation of total comprehensive income in the statement of stockholders' equity or the footnotes will no longer be allowed. The calculation of net income and basic and diluted net income per share will not be affected. ASU 2011-005 is effective for fiscal years, and interim periods within those years, beginning on or after December 15, 2011, which means that it will be effective for Fiscal 2013. Retrospective adoption is required and early adoption is permitted. We have adopted ASU 2011-005.

(f) Recent Accounting Pronouncements not yet adopted

In September 2011, the FASB issued ASU 2011-08, Intangibles—Goodwill and Other (Topic 350): Testing Goodwill for Impairment (“ASU 2011-08”). ASU 2011-08 modifies the impairment test for goodwill and indefinite lived intangibles so that it is no longer required to calculate the fair value of a reporting unit unless the Company believes, based on qualitative factors, it is more likely than not that the reporting unit's or indefinite lived intangible asset's fair value is less than the carrying value. ASU 2011-08 is effective for fiscal years that begin after December 15, 2011, with early adoption allowed. The Company intends toadopt ASU 2011-08 effective for its fourth quarter Fiscal 2012 impairment analysis, which is not expected to have a material effect on the Company's consolidated financial statements.

In May 2011, the FASB issued ASU 2011-04, Fair Value Measurement(Topic 820)(“ASU 2011-04”). ASU 2011-04 is intended to create consistency between U.S. GAAP and International Financial Reporting Standards on the definition of fair value and on the guidance on how to measure fair value and on what to disclose about fair value measurements. ASU 2011-04 will be effective for financial statements issued for fiscal periods beginning after December 15, 2011, with early adoption prohibited for public entities. The Company is currently evaluating the impact ASU 2011-04 will have on its consolidated financial statements.