long-term assets in the accompanying Balance Sheets.
temporary unrealized gains and losses reported as a component of Stockholders' Deficit until their
disposition. The Company reviews all available-for-sale securities at each period end to determine if they
remain available-for-sale based on the Company's then current intent and ability to sell the security if it is
required to do so. The amortized cost of debt securities in this category is adjusted for amortization of
premiums and accretion of discounts to maturity. Such amortization is included in Interest Income in the
accompanying Statements of Operations and Comprehensive Loss. Realized gains and losses on ARS
the Company held along with declines in value judged to be other-than-temporary are reported in
Realized Gains on Auction Rate Securities, Net in the accompanying Statements of Operations and
Comprehensive Loss when recognized. The cost of securities sold is based on the specific identification
the Company determined the carrying value of the ARS under the fair value hierarchy using Level III, or
unobservable inputs, as there was no active market for the securities. The most significant unobservable
inputs used in this method were estimates of the amount of time until an event resulting in liquidity of the
ARS would occur and the discount rate, which incorporates estimates of credit risk and a liquidity
premium (discount). Due to the inherent complexity in valuing these securities, the Company engaged a
third-party valuation firm to perform an independent valuation of the ARS as part of the Company's overall
fair value analysis beginning with the first quarter of fiscal 2009 and continuing through the quarter ended
December 31, 2010.
Additions and improvements are capitalized. Certain costs to internally develop software are also
capitalized. Maintenance and repairs are expensed as incurred.
estimated useful lives:
basis over the shorter of the expected useful life of the improvements or the remaining lease term.
circumstances indicate that the carrying value of the assets may not be recoverable. An impairment loss
would be recognized when estimated undiscounted future cash flows from the use of the asset and its
eventual disposition is less than its carrying amount.
additional agreements, in which it received an equity interest as consideration for all or a portion of
up-front, license or other fees under the terms of the agreement. The Company reports the value of equity
securities received from non-publicly traded companies in which it does not exercise a significant or
controlling interest at cost as Other Long-term Assets in the accompanying Balance Sheets. The
Company monitors its investment for impairment at least annually and makes appropriate reductions in
the carrying value if it is determined that an impairment has occurred, based primarily on the financial
condition and near and long-term prospects of the issuer.
laboratories, medical centers, contract research organizations and other vendors (collectively ``CROs'').
These CROs generally bill monthly or quarterly for services performed or bill based upon milestone
achievement. For preclinical studies, the Company accrues expenses based upon estimated percentage
of work completed and the contract milestones remaining. For clinical studies, expenses are accrued
based upon the number of patients enrolled and the duration of the study. The Company monitors patient
enrollment, the progress of clinical studies and related activities to the extent possible through internal
reviews of data reported to it by the CROs, correspondence with the CROs and clinical site visits. The
Company's estimates depend on the timeliness and accuracy of the data provided by its CROs regarding
the status of each program and total program spending. The Company periodically evaluates the
estimates to determine if adjustments are necessary or appropriate based on information it receives.
Revenue, which are then classified as either current or long-term in the accompanying Balance Sheets
based on the period during which they are expected to be recognized as revenue.
The Company reviews all debt agreements to determine the appropriate accounting treatment when the
agreement is entered into and reviews all amendments to determine if the changes require accounting for
the amendment as a modification of the debt, or as an extinguishment and new debt. The Company also
reviews each long-term debt arrangement to determine if any feature of the debt requires bifurcation
and/or separate valuation. These may include hybrid instruments, which are comprised of at least two
components ((1) a debt host instrument and (2) one or more conversion features), warrants and other
embedded derivatives, such as puts and other rights of the debt holder.
the embedded derivatives is a variable interest rate structure that constitutes a liquidity-linked variable
spread feature. The other relates to Deerfield's ability to accelerate the repayment of the debt in the event
of certain changes in control of the Company that constitutes a significant transaction contingent put