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Summary of business and significant accounting policies
9 Months Ended
Mar. 31, 2012
Summary of business and significant accounting policies

1. Summary of business and significant accounting policies

Description of business

TeleNav, Inc., also referred to in this report as “we,” “our” or “us,” was incorporated in September 1999 in the State of Delaware. Our mission is to make people’s lives easier, less stressful, fun, and more productive when they are on the go. Our personalized navigation and location based services, or LBS, “get you and get you there” and help on-the-go people make daily decisions about “where to go, when to leave, how to get there, and what to do when they arrive”—and we make it possible across mobile devices, wireless carriers, connected cars, mobile applications and enterprises, both domestically and abroad. We operate in a single segment. Our fiscal year ends on June 30 and in this report we refer to the fiscal year ended June 30, 2011 as “fiscal 2011” and the fiscal year ending June 30, 2012 as “fiscal 2012.”

Basis of presentation

The unaudited condensed consolidated financial statements and accompanying notes have been prepared in accordance with accounting principles generally accepted in the United States of America, or GAAP. The condensed consolidated financial statements include the accounts of TeleNav, Inc. and our wholly owned subsidiaries in China, the United Kingdom and Brazil. All significant intercompany balances and transactions have been eliminated in consolidation. The financial statements include all adjustments (consisting only of normal recurring adjustments) that our management believes are necessary for a fair presentation of the periods presented. These interim financial results are not necessarily indicative of results expected for the full fiscal year or for any subsequent interim period.

Our condensed consolidated financial statements also include the financial results of Shanghai Jitu Software Development Ltd., or Jitu, located in China. Based on our contractual arrangements with the shareholders of Jitu, we have determined that Jitu is a variable interest entity, or VIE, for which we are the primary beneficiary and are required to consolidate in accordance with Accounting Standards Codification subtopic 810-10, or ASC 810-10, Consolidation: Overall. Despite our lack of technical ownership, there exists a parent-subsidiary relationship between TeleNav, Inc. and Jitu, whereby through contractual arrangement, the equity holders of Jitu have effectively assigned all of their voting rights underlying their equity interest in Jitu to us. In addition, through these agreements, we have the ability and intention to absorb all of the expected losses and profits of Jitu. The results of Jitu did not have a material impact on our overall operating results for the three and nine months ended March 31, 2012 and 2011.

The condensed consolidated financial statements and related financial information should be read in conjunction with the audited consolidated financial statements and the related notes thereto for fiscal 2011, included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2011, or Form 10-K, filed on September 9, 2011 with the U.S. Securities and Exchange Commission (the “SEC”).

With the exception of our policies for long-lived assets and leases discussed below, there have been no material changes to our significant accounting policies as compared to the significant accounting policies described in our Form 10-K.

Use of estimates

The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Significant estimates and assumptions made by us include the determination of revenue recognition and deferred revenue, the recoverability of accounts receivable, the fair value of stock awards issued, the determination of income taxes and the recoverability of deferred tax assets. Actual results could differ from those estimates.

Concentrations of risk and significant customers

Revenue related to services provided through Sprint Nextel Corporation, or Sprint, comprised 35% and 36% of revenue for the three months ended March 31, 2012 and 2011, respectively, and 37% and 43% of revenue for the nine months ended March 31, 2012 and 2011, respectively. Receivables due from Sprint were 5% and 6% of total accounts receivable at March 31, 2012 and June 30, 2011, respectively. Revenue related to services provided through AT&T Inc., or AT&T, comprised 34% of revenue for each of the three months ended March 31, 2012 and 2011, and 37% of revenue for the nine months ended March 31, 2012 and 2011. Receivables due from AT&T were 53% and 50% of total accounts receivable at March 31, 2012 and June 30, 2011, respectively. Revenue related to services provided through Ford Motor Company, or Ford, comprised 18% and 11% of revenue for the three and nine months ended March 31, 2012, respectively. As of March 31, 2012 and June 30, 2011, receivables due from Ford were 12% and 17% of total accounts receivable, respectively. No other customer represented 10% of our revenue or 10% of our accounts receivable for any period presented.

 

Our map and points of interest, or POI, data were provided principally by TomTom North America, Inc., or TomTom Maps, and Navigation Technologies Corporation, or NAVTEQ, in the three and nine months ended March 31, 2012 and 2011. To date, we are not aware of circumstances that may impair either party’s intent or ability to continue providing such services to us.

Long-lived assets

We evaluate our long-lived assets for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Recoverability of these assets is measured by a comparison of the carrying amounts to the future undiscounted cash flows the assets are expected to generate. If long-lived assets are considered to be impaired, the impairment to be recognized equals the amount by which the carrying value of the asset exceeds its fair value. We have not recorded any material impairment to our long-lived assets in any of the periods presented.

Leases

We lease our office facilities under operating lease agreements. Office facilities subject to an operating lease and the related lease payments are not recorded on our balance sheet. The terms of certain lease agreements provide for rental payments on a graduated basis; however, we recognize rent expense on a straight-line basis over the lease period in accordance with authoritative accounting guidance. Any lease incentives are recognized as reductions of rental expense on a straight-line basis over the term of the lease. The lease term begins on the date we become legally obligated for the rent payments or when we take possession of the office space, whichever is earlier. As of March 31, 2012, we had a total of $8.7 million in deferred rent related to tenant improvement lease incentives and graduated rent payments recorded as liabilities on our balance sheet.

Comprehensive income

Comprehensive income consists of net income and other comprehensive income (loss), which includes cumulative foreign currency translation gains or losses and unrealized gains or losses on marketable securities, net of tax. Comprehensive income totaled $7.4 million and $11.3 million for the three months ended March 31, 2012 and 2011, respectively. Comprehensive income totaled $25.7 million and $33.6 million for the nine months ended March 31, 2012 and 2011, respectively.

Recent accounting pronouncements

There have been no new accounting pronouncements during the nine months ended March 31, 2012, with the exception of those discussed below, as compared to the recent accounting pronouncements described in our Form 10-K, that are of significance to us.

In June 2011, the Financial Accounting Standards Board, or FASB, issued amended guidance to require an entity to present total comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. The amended guidance eliminates the current option to present the components of other comprehensive income as part of the statement of equity. The amendment becomes effective retrospectively for our interim period ending September 30, 2012 and earlier adoption is permitted. The adoption of this guidance is not expected to have a material effect on our consolidated financial statements.

In December 2011, the FASB issued guidance that defers the effective date for amendments to the presentation of reclassifications of items out of accumulated other comprehensive income adopted in its June 2011 guidance. This guidance becomes effective retrospectively for our interim period ending September 30, 2012 and earlier adoption is permitted. The adoption of this guidance is not expected to have a material effect on our consolidated financial statements.