Notes to Consolidated Financial Statements (in thousands, except share and per share data) ended December 31, 2001 and 2000. Accumulated amortization was $1,345 and $1,028 at December 31, 2001 and 2000, respectively. Effective January 1, 2002, in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 142 “Goodwill and Other Intangible Assets” (“FAS 142”), the Company is no longer amortizing its remaining goodwill balance; however, the Company does evaluate goodwill for impairment, in accordance with FAS 142, at least annually, or as circumstances warrant. Other intangibles represent primarily customer relationships and assembled workforce, which are being amortized on a straight-line basis over 10 years and 5-8 years, respectively. The Company evaluates such intangibles for impairment in accordance with FAS 142, at each balance sheet date Long-Lived Assets. In accordance with Statement of Financial Accounting Standards (“SFAS”) No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”, which was adopted in 2002, the Company reviews for impairment long-lived assets and certain identifiable intangibles whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. In general, the Company will recognize an impairment loss when the sum of undiscounted expected future cash flows is less than the carrying amount of such assets. The measurement for such an impairment loss is then based on the fair value of the asset. Revenue Recognition. The Company’s services are entered into on either a time-and-materials or fixed-price basis. Revenues related to time-and-mate- rial contracts are recognized as the service is performed. Revenues related to fixed-price contracts that provide for highly complex information technology application development services or that provide for a combination of appli- cation development and application maintenance services are recognized as the service is performed using the percentage-of-completion method of accounting, under which the sales value of performance is recognized on the basis of the percentage that each contract's cost to date bears to the total estimated cost. Revenues related to fixed-priced contracts that provide sole- ly for application maintenance services are recognized on a straight-line basis or as services are rendered or transactions processed in accordance with contractual terms. Expenses are recorded as incurred over the contract period. Fixed price contracts are cancelable subject to a specified notice period. All services provided by the Company through the date of cancellation are due and payable under the contract terms. The Company issues invoices related to fixed price contracts based upon achievement of milestones during a proj- ect or other contractual terms. Differences between the timing of billings, based upon contract milestones or other contractual terms, and the recogni- tion of revenue, based upon the percentage-of-completion method of accounting, are recognized as either unbilled or deferred revenue. Estimates of certain fixed contracts are subject to adjustment as a project progresses to reflect changes in expected completion costs. The cumulative impact of any revision in estimates is reflected in the financial reporting period in which the change in estimate becomes known and any anticipated losses on contracts are recognized immediately. A reserve for warranty provisions under such contracts, which generally exist for ninety days past contract completion, is estimated and accrued during the contract period. Foreign Currency Translation. The assets and liabilities of the Company’s Canadian and European subsidiaries are translated into U.S. dollars from local currencies at current exchange rates and revenues and expenses are translated from local currencies at average monthly exchange rates. The resulting translation adjustments are recorded in a separate component of stockholders’ equity. For the Company’s Indian subsidiary (“CTS India”), the functional currency is the U.S. dollar, since its sales are made primarily in the United States, the sales price is predominantly in U.S. dollars and there is a high volume of intercompany transactions denominated in U.S. dollars between CTS India and its U.S. affiliates. Non-monetary assets and liabilities are translated at historical exchange rates, while monetary assets and liabili- ties are translated at current exchange rates. The resulting gain (loss) is included in other income. Unbilled Accounts Receivable. Unbilled accounts receivable represent rev- enues on contracts to be billed, in subsequent periods, as per the terms of the contracts.  Accounting for Stock-Based Employee Compensation Plans. At December 31, 2002, the Company has four stock-based employee compensation plans, which are described more fully in Note 8. The company accounts for those plans under the recognition and measurement principles of APB Opinion No. 25, “Accounting for Stock Issued to Employees, and related Interpretations.” No stock-based employee compensation cost is reflected in net income, as all options granted under those plans had an exercise price equal to the market value of the underlying common stock on the date of grant. The following table illustrates the effect on net income and earnings per share if the Company had applied the fair value recognition provisions of FASB Statement No. 123, “Accounting for Stock-Based Compensation”, to stock- based employee compensation. Revenues related to services performed without a signed agreement or work order are not recognized until there is evidence of an arrangement, such as when agreements or work orders are signed or payment is received; however the cost related to the performance of such work is recognized in the period the services are rendered. Such revenue is recognized when, and if, evidence of an arrangement is obtained. December 31, 2002 2001 2000 Net income, as reported $34,562 $22,160 $17,683 Deduct Total stock-based compensation expense determined under the fair value method for all awards, net of related tax benefits 11,562 7,127 4,868 Pro forma net income $23,000 $15,033 $12,815 Earnings per share: Net income, as reported-basic $0.58 $0.39 $0.32 Pro forma-basic $0.39 $0.26 $0.23 Net income, as reported-diluted $0.54 $0.36 $0.29 Pro forma-diluted $0.36 $0.25 $0.21 29