Allowance for doubtful accounts
We maintain an allowance for doubtful accounts for estimated losses that may result from the inability of our customers to make required payments. Our methodology for determining this allowance requires estimates and is based on the age of the receivable, customer payment practices and history, inquiries regarding the customer, credit reports from third parties and other financial information. If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required which could affect our financial results in future periods. As of
June 30, 2013and 2012, accounts receivable totaled approximately $228.5 millionand $235.4 million, net of an allowance for doubtful accounts of approximately $30.4 millionand $31.8 million, respectively. Additionally, bad debt expense for fiscal years 2013, 2012 and 2011 was approximately $3.6 million, $7.1 millionand $6.2 million, respectively. Inventory Inventory is stated at the lower of cost or market. Cost is determined principally by the first-in, first-out pricing method. We regularly compare inventory quantities on hand against historical usage or forecasts related to specific items to evaluate obsolescence and excessive quantities. Nevertheless, changes in business trends, competition and other factors not apparent when, or occurring after, we make our estimates of inventory obsolescence could result in the need to undertake additional inventory write downs in future periods. We wrote down our inventory by approximately $12.8 millionand $12.6 millionas of June 30, 2013and 2012, respectively.
Capitalized software development costs
Costs incurred in the research and development of new software products to be licensed to others, primarily consisting of salaries, employee benefits and administrative costs, are expensed as incurred and included in research and development expenses until technological feasibility is established. The capitalization of software development costs on a product-by-product basis starts when a product's technological feasibility has been established and ends when the product is available for general release to customers, at which time amortization of the capitalized software development costs begins. Technological feasibility is established when the product reaches the working model stage. The cost of purchased software is also capitalized. Annual amortization of capitalized software development costs is either included in software cost of sales or service cost of sales. For each capitalized software product, the annual amortization is equal to the greater of: (i) the amount computed using the ratio that the software product's current fiscal year gross revenue bears to the total current fiscal year and anticipated future gross revenues for that product or (ii) the amount computed based on the straight-line method over the remaining estimated economic life of the product. If we incorrectly estimate the remaining economic life of a product or the anticipated future gross revenues of a product, we may in the future be required to take a significant write off of capitalized software development costs or to accelerate amortization, either of which could materially affect our future financial results. Amortization expenses for fiscal years 2013, 2012 and 2011 were approximately
$5.2 million, $7.1 millionand $7.5 million, respectively.