Annual Report 2007 - LivePerson

LIVEPERSON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands, Except Share and per Share Data)
(1) Summary of Operations and Significant Accounting Policies
(a) Summary of Operations
LivePerson, Inc. (the ‘‘Company’’ or ‘‘LivePerson’’) was incorporated in the State of Delaware in 1995.
The Company commenced operations in 1996. LivePerson provides online engagement solutions that facilitate
real-time assistance and trusted expert advice.
The Company’s primary revenue source is from the sale of the LivePerson services under the brand
names Timpani and LivePerson. With the acquisition of Kasamba Inc. (‘‘Kasamba’’), on October 3, 2007, the
Company also facilitates online transactions between service providers (‘‘experts’’) who provide expert online
advice to consumers (‘‘users’’). Headquartered in New York City, the Company’s product development staff,
help desk, online sales support and the Kasamba operations, are located in Israel. The Company also
maintains satellite sales offices in Atlanta and the United Kingdom.
(b) Principles of Consolidation
The consolidated financial statements reflect the operations of LivePerson and its wholly-owned
subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.
(c) Use of Estimates
The preparation of the consolidated financial statements in accordance with accounting principles
generally accepted in the U.S. requires the Company’s management to make a number of estimates and
assumptions relating to the reported amounts of assets and liabilities, the disclosure of contingent assets and
liabilities at the date of the consolidated financial statements, and the reported amounts of revenue and
expenses during the period. Significant items subject to such estimates and assumptions include the carrying
amount of goodwill, intangibles, stock-based compensation, valuation allowances for deferred income tax
assets, accounts receivable, the expected term of a client relationship, and accruals. Actual results could differ
from those estimates.
(d) Cash and Cash Equivalents
The Company considers all highly liquid securities with original maturities of three months or less when
acquired to be cash equivalents. Cash equivalents, which primarily consist of money market funds, are
recorded at cost, which approximates fair value.
(e) Property and Equipment
Property and equipment are stated at cost, net of accumulated depreciation and amortization. Depreciation
is calculated using the straight-line method over the estimated useful lives of the related assets, generally three
to five years for equipment and software. Leasehold improvements are amortized using the straight-line
method over the shorter of the lease term or the estimated useful life of the asset. Total depreciation for the
years ended December 31, 2007, 2006 and 2005 was $802, $555, and $171, respectively.
(f) Impairment of Long-Lived Assets
In accordance with Statement of Financial Accounting Standards (‘‘SFAS’’) No. 144, ‘‘Accounting for the
Impairment or Disposal of Long-lived Assets,’’ long-lived assets, such as property, plant and equipment and
purchased intangibles subject to amortization are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying value of an asset may not be recoverable. Recoverability of assets to
be held and used is measured by a comparison of the carrying value of an asset to estimated undiscounted
future cash flows expected to be generated by the asset. If the carrying value of an asset exceeds its estimated
future cash flows, an impairment charge is recognized in the amount by which the carrying value of the asset
exceeds the fair value of the asset. Assets to be disposed of would be separately presented in the balance sheet
and reported at the lower of the carrying value or the fair value less costs to sell, and are no longer
depreciated. The assets and liabilities of a disposed group classified as held for sale would be presented
separately in the appropriate asset and liability sections of the balance sheet.
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