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INTERMEDIX HOLDINGS INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2010 the impairment of goodwill and other intangible assets, the valuation of deferred tax assets, income tax uncertainties and purchase price allocations pursuant to business combinations. Actual results could differ from such estimates. (c) Cash and Cash Equivalents The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. Cash and cash equivalents include amounts billed and collected on behalf of clients (see note 1(I) for discussion of related liability). (d) Receivables, Net Trade Receivables Trade receivables primarily consist of amounts due to the Company pursuant to service, subscription and or license contracts with its customers. The carrying amount of trade receivables approximates fair value given the short maturities of such receivables. Allowances for Refunds and Doubtful Accounts The Company records allowances for fees associated with amounts expected to be refunded due to overpayments held on behalf of its customers. Reserves related to trade receivable collectability are recorded when specific accounts are identified as being at risk based on review of past due accounts and the related facts and circumstances. In general, reserves against accounts receivable are insignificant. (e) Prepaid Expenses and Other Current Assets "Prepaid expenses and other current assets" consist of amounts paid in advance for insurance, maintenance contracts and other customary and routine items required for the operation of the business. (1) Property and Equipment, Net "Property and equipment, net" is stated at cost less accumulated depreciation and amortization. Property and equipment held under capitalized leases is stated at the present value of the future minimum lease payments and is amortized on a straight -line basis over the shorter of the lease term or estimated useful life of the asset. Depreciation and amortization on property and equipment is calculated on a straight -line basis over the estimated useful life of each asset. Leasehold improvements are amortized over the shorter of the underlying lease term or useful life of the asset. Maintenance and repairs are charged directly to expense as incurred, while betterments and renewals are generally capitalized as property, equipment and leasehold improvements. When an item is retired or otherwise disposed of, the cost and applicable accumulated depreciation and amortization is removed and the resulting gain or loss is recognized. (g) Computer Software and Technology Development Costs, Net In accordance with ASC Topic 350 -40, Internal -Use Software (ASC Topic 350 -40), the Company capitalizes costs incurred during the application development stage related to its propriety software 9 (Continued)