Software Development Costs

6 Months Ended

Jun. 30, 2014

Software Development Costs [Abstract]

Certain computer software development costs are capitalized in the accompanying consolidated balance sheets. Capitalization of computer software development costs begins upon the establishment of technological feasibility. Capitalization ceases and amortization of capitalized costs begins when the software product is commercially available for general release to customers. Amortization of capitalized computer software development costs is included in cost of revenue and is determined using the straight-line method over the remaining estimated economic life of the product, typically three years. On an annual basis, and more frequently as conditions indicate, the Company assesses the recovery of the unamortized software development costs by estimating the net undiscounted cash flows expected to be generated by the sale of the product. If the undiscounted cash flows are not sufficient to recover the unamortized software costs the Company will write-down the investment to its estimated fair value based on future undiscounted cash flows. The excess of any unamortized software development costs over the related net realizable value is written down and charged to cost of revenue.

Software development costs capitalized were $194,000 and $349,000 for the three and six months ended June 30, 2014, respectively, and $498,000 and $995,000 for the three and six months ended June 30, 2013, respectively. Total amortization expense was $63,000 and $95,000 for the three and six months ended June 30, 2014, respectively, and $302,000 and $478,000 for the three and six months ended June 30, 2013, respectively.

During the second quarter of 2013, the Company incurred a charge of $2.2 million related to the write-down of certain capitalized software development costs based on the net realizable value analysis. The Company did not recognize any write-downs of software development costs in 2014.

- Definition

The entire disclosure for research, development, and computer software activities, including contracts and arrangements to be performed for others and with federal government. Includes costs incurred (1) in a planned search or critical investigation aimed at discovery of new knowledge with the hope that such knowledge will be useful in developing a new product or service, a new process or technique, or in bringing about a significant improvement to an existing product or process; or (2) to translate research findings or other knowledge into a plan or design for a new product or process or for a significant improvement to an existing product or process whether intended for sale or the entity's use, during the reporting period charged to research and development projects, including the costs of developing computer software up to the point in time of achieving technological feasibility and in-process research and development acquired in a business combination consummated during the period.

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