Incredimail 2010 Annual Report Download - page 97

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INCREDIMAIL LTD AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and
cash equivalents, marketable securities and trade receivables.
The majority of the Company’
s cash and cash equivalents are invested mainly in dollar instruments with major banks in
Israel and the U.S. Deposits in the U.S. may be in excess of insured limits and are not insured in other jurisdictions.
Generally, these deposits may be redeemed upon demand and, therefore, bear minimal risk.
The Company’s marketable securities consist of investment-
grade corporate debentures and government debentures. The
Company’
s investment policy, approved by the Investment Committee, limits the amount the Company may invest in any
one type of investment or issuer, thereby reducing credit risk concentrations.
The Company is subject to a low amount of credit risk with respect to sales of the Company’
s software products and
content database, as these sales are primarily obtained through credit card sales. The Company’
s major customer is
financially sound, and the Company believes low credit risk is associated with this customer. To date, the Company has
not experienced any material bad debt losses.
The Company's liability for severance pay is calculated pursuant to Israel's Severance Pay Law based on its employees'
most recent monthly salaries, multiplied by the number of years of their employment, or a portion thereof, as of the
balance sheet date.
This liability is fully provided for by monthly deposits in insurance policies and by an accrual.
The deposited funds include profits (losses) accumulated up to the balance sheet date. The deposited funds may be
withdrawn only upon the fulfillment of the obligation pursuant to Israel's Severance Pay Law or labor agreements.
The Company's agreements with employees in Israel, joining the Company since February 2, 2008, are in accordance with
section 14 of the Severance Pay Law, 1963, where the Company's contributions for severance pay shall be instead of its
severance liability. Upon contribution of the full amount of the employee's monthly salary, and release of the policy to the
employee, no additional calculations shall be conducted between the parties regarding the matter of severance pay and no
additional payments shall be made by the Company to the employee. Further, the related obligation and amounts deposits
on behalf of such obligation are not stated on the balance sheet, as they are legally released from obligation to employees
once the deposit amounts have been paid.
Severance expenses for the years ended December 31, 2008, 2009 and 2010 amounted to $715,000, $362,000 and
$504,000, respectively.
NOTE 2:
-
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
n.
Concentrations of credit risk:
o.
Severance pay:
F
-
14