Accounting Policies (Tables)

12 Months Ended

Dec. 31, 2013

Deferred Revenue and Customer Advances

As of December 31, 2013 and 2012, deferred revenue and customer advances consisted of the following and are included in the short and long-term deferred revenue and customer advances:

	2013		2012
	(in thousands)
Customer advances	$	4,825	$	39,613
Equipment maintenance, training and extended warranty		56,914		51,198
Undelivered elements		6,971		6,773
Total deferred revenue and customer advances	$	68,710	$	97,584

Warranty Accrual Included in Other Accrued Liabilities

The balance below is included in other accrued liabilities.

	Amount
	(in thousands)
Balance at December 31, 2010	$	9,886
Acquisition		327
Accruals for warranties issued during the period		13,167
Accruals related to pre-existing warranties		(2,689	)
Settlements made during the period		(12,538	)
Balance at December 31, 2011		8,153
Accruals for warranties issued during the period		14,704
Accruals related to pre-existing warranties		877
Settlements made during the period		(13,948	)
Balance at December 31, 2012		9,786
Accruals for warranties issued during the period		10,574
Accruals related to pre-existing warranties		(3,534	)
Settlements made during the period		(10,166	)
Balance at December 31, 2013	$	6,660

Extended Product Warranty Included in Short and Long-Term Deferred Revenue and Customer Advances

The balance below is included in short and long-term deferred revenue and customer advances.

	Amount
	(in thousands)
Balance at December 31, 2010	$	8,972
Acquisition		3,151
Deferral of new extended warranty revenue		8,659
Recognition of extended warranty deferred revenue		(8,040	)
Balance at December 31, 2011		12,742
Deferral of new extended warranty revenue		22,344
Recognition of extended warranty deferred revenue		(8,099	)
Balance at December 31, 2012		26,987
Deferral of new extended warranty revenue		20,191
Recognition of extended warranty deferred revenue		(12,789	)
Balance at December 31, 2013	$	34,389

Useful Lives of Assets

Teradyne provides for depreciation of its assets principally on the straight-line method with the cost of the assets being charged to expense over their useful lives as follows:

Buildings	40 years
Building improvements	5 to 10 years
Leasehold improvements	Lesser of lease term or useful life
Furniture and fixtures	10 years
Test systems manufactured internally	6 years
Machinery and equipment	3 to 5 years
Software	3 to 5 years

Effect to Income (Loss) from Continuing Operations for Recording Stock-Based Compensation

The effect to income from continuing operations for recording stock-based compensation for the years ended December 31 was as follows:

	2013			2012			2011
	(in thousands)
Cost of revenue	$	4,338		$	6,604		$	7,097
Engineering and development		12,452			13,589			10,001
Selling and administrative		19,822			19,727			15,239
Stock-based compensation		36,612			39,920			32,337
Income tax benefit		(9,762	)		(9,548	)		(8,509	)
Total stock-based compensation expense after income taxes	$	26,850		$	30,372		$	23,828

Stock Option

Fair Value of Stock Options Estimated Using Weighted Average Assumptions

The fair value of the stock options at grant date was estimated using the Black-Scholes option-pricing model with the following assumptions:

	2013			2012			2011
Expected life (years)		4.00			3.50			4.00
Interest rate		0.6	%		0.4	%		1.5	%
Volatility-historical		46.8	%		56.0	%		52.1	%
Dividend yield		0.0	%		0.0	%		0.0	%

Stock Purchase Rights

Fair Value of Stock Options Estimated Using Weighted Average Assumptions

The fair value of the employees’ purchase rights was estimated using the Black-Scholes option-pricing model with the following assumptions:

	2012			2011
Expected life (years)		0.5			0.5
Interest rate		0.1	%		0.1	%
Volatility-historical		42.7	%		41.0	%
Dividend yield		0.0	%		0.0	%

Litepoint Corporation

Fair Value of Stock Options Estimated Using Weighted Average Assumptions

The fair value of stock options was estimated using the following weighted average assumptions:

Expected life (years)	6.2
Expected volatility	49.1	%
Risk-free interest rate	1.3	%
Dividend yield	0.0	%