This excerpt taken from the RVBD 10-K filed Feb 9, 2007.
2. CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE
On June 29, 2005, the FASB issued Staff Position 150-5, Issuers Accounting under FASB Statement No. 150 for Freestanding Warrants and Other Similar Instruments on Shares That Are
RIVERBED TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Redeemable. Under Statement 150, the freestanding warrants that were related to our convertible preferred stock were classified as liabilities and were recorded at fair value. We previously accounted for freestanding warrants for the purchase of our convertible preferred stock under EITF Issue No. 96-18, Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services. We adopted FSP 150-5 and accounted for the cumulative effect of the change in accounting principle as of the beginning of the third quarter of 2005. For the year ended December 31, 2005, the impact of the change in accounting principle was to increase net loss by $510,000, or $0.05 per share. The impact consists of a $280,000 cumulative charge for adoption as of July 1, 2005, reflecting the fair value of the warrants as of that date, and $230,000 of additional expense that has been recorded in other income (expense), net to reflect the increase in fair value between July 1, 2005 and December 31, 2005. In the year ended December 31, 2006 (through the date of our IPO), we recorded $644,000 of additional expense reflected as other income (expense), net to reflect the increase in the fair value of the warrants.
The impact of the cumulative effect of change in accounting principle on net loss per common share was as follows: