The Company maintains interests in several privately held companies primarily
through its various venture capital funds. The Company's venture capital
investment portfolio, @Ventures, invests in early-stage technology companies.
These investments are generally made in connection with a round of financing
with other third-party investors. Investments in which the Company's interest is
less than 20% and which are not classified as available-for-sale securities are
carried at the lower of cost or net realizable value unless it is determined
that the Company exercises significant influence over the investee company, in
which case the equity method of accounting is used. For those investments in
which the Company's voting interest is between 20% and 50%, the equity method of
accounting is generally used. Under this method, the investment balance,
originally recorded at cost, is adjusted to recognize the Company's share of net
earnings or losses of the investee company as they occur, limited to the extent
of the Company's investment in, advances to and commitments for the investee.
The Company's share of net earnings or losses of the investee are reflected in
"Equity in income (losses) of affiliates and impairments" in the Company's
Consolidated Statements of Operations.
The Company assesses the need to record impairment losses on its investments and
records such losses when the impairment of an investment is determined to be
other than temporary in nature. The process of assessing whether a particular
investment's net realizable value is less than its carrying cost requires a
significant amount of judgment. This valuation process is based primarily on
information that the Company requests from these privately held companies who
are not subject to the same disclosure and audit requirements as the reports
required of U.S. public companies. As such, the reliability and accuracy of the
data may vary. Based on the Company's evaluation, it recorded impairment charges
related to its investments in privately held companies of
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Estimating the net realizable value of investments in privately held early-stage technology companies is inherently subjective and has contributed to significant volatility in our reported results of operations in the past and it may negatively impact our results of operations in the future. We may incur additional impairment charges to our investments in privately held companies, which could have an adverse impact on our future results of operations. A decline in the carrying value of our
$8.0 millionof investments in affiliates at July 31, 2013ranging from 10% to 20%, respectively, would decrease our income from continuing operations by approximately $0.8 millionto $1.6 million. At the time an equity method investee issues its stock to unrelated parties, the Company accounts for that share issuance as if the Company has sold a proportionate share of its investment. The Company records any gain or loss resulting from an equity method investee's share issuance in its Consolidated Statements of Operations. During fiscal years ended July 31, 2013, 2012, and 2011, no such gains or losses had been recorded related to any @Ventures investments.