Symantec 1996 Annual Report Download - page 34

Su m m a ry of Significant Accounting Po l i c i e s
Bu s i n e s s Symantec develops, markets and supports a dive r s i f i e d
line of application and system software products designed to
enhance individual and work g r oup productivity as well as man-
age networked computing environments. Principal pro d u c t s
include advanced utilities, security utilities, network / c o m m u n i c a -
tions utilities, fax, contact management, development tools and
c o n s u m e r / p r oductivity applications. Customers consist primarily
of corporations, higher education institutions, government agen-
cies and individual users, which are mainly located in No rt h
America, Eu rope, Asia/Pacific and Latin America.
Principles of Consolidation The accompanying consolidated
financial statements include the accounts of Sy m a n t e c
Corporation and its wholly-owned subsidiaries (“Symantec” or
the “Company”). All significant intercompany accounts and
transactions have been eliminated.
Basis of Presentation During fiscal 1996, 1995 and 1994,
Symantec acquired various companies in transactions accounted
for as poolings of interest. Accordingly, all financial information
has been restated to reflect the combined operations of
Symantec and the acquired companies with the exception of
Intec Systems Corporation and SLR Systems, Inc. The results of
operations of Intec and S L R we re not material to Sy m a n t e c’s
consolidated financial statements, and therefore, amounts prior
to the year of acquisition were not combined with Symantec’s
financial statements.
Symantec has a 52/53-week fiscal accounting ye a r. Ac c o r d i n g l y,
all re f e r ences as of and for the periods ended Ma rc h 3 1 , 1 9 9 6 ,
1995 and 1994 reflect amounts as of and for the periods ended
Ma r c h 29, 1996, Ma r c h 3 1 , 1995 and Ap r i l1 , 1994, re s p e c t i v e l y.
Use of Estimates The preparation of financial statements in
conformity with generally accepted accounting principles
re q u i res management to make estimates and assumptions that
affect the amounts re p o rted in the financial statements and
accompanying notes. Actual results could differ from those esti-
m a t e s .
Foreign Currency Translation In general, the functional cur-
rency of the Company’s foreign subsidiaries is the local
currency. Assets and liabilities denominated in foreign curren-
cies are translated using the exchange rate on the balance sheet
dates. The cumulative translation adjustments resulting fro m
this process are shown separately as a component of stockhold-
ers’ equity. Revenues and expenses are translated using average
e xchange rates pre vailing during the ye a r. Fo reign curre n c y
transaction gains and losses are not material and are included in
the determination of net income (loss).
Re venue Recognition Symantec re c o g n i zes re venue upon
shipment when no significant vendor obligations remain and
collection of the re c e i vable, net of provisions for estimated
future returns, is probable. Prior to fiscal 1994, Central Point
generally recognized revenue upon shipment, along with a pro-
vision for estimated returns. Due to significant changes in the
m a rk e t’s perception of Central Po i n t’s long-term viability and
the Agreement and Plan of Reorganization signed by Symantec
and Central Point in fiscal 1994, Central Point was no longer
able to reasonably estimate future returns from distributors and
resellers. In accordance with Statement of Financial Accounting
Standards No. 48, revenue and the related cost of revenue for
1994 for software shipments to these distributors and resellers
was deferred until sold by the distributor or reseller to the end
u s e r. This re venue and cost of re venue deferral resulted in a
decrease in North American net revenues of approximately $5.0
million and international net revenues of approximately $10.0
million and an increase in the fiscal 1994 loss before provision
for income taxes of approximately $12.3 million. Sy m a n t e c
later analyzed returns related to the Central Point products for
the prior eight quarters to determine when such products were
being sold through to end users. As the result of this analysis of
the remaining Central Point products in the distribution chan-
nel, Symantec recognized approximately $3.0 million of North
American net re venues in the Ma r c h 1995 quarter and $7.2
million of international net revenues in the June 1995 quarter
that had been previously deferred by Central Point.
Re venues related to significant post-contract support agre e -
ments (generally product maintenance agreements) are deferre d
and re c o g n i zed over the period of the agreements. The estimated
cost of providing insignificant post-contract support (generally
telephone support) is accrued at the time of the sale and is
included in sales and marketing expense. Technical support costs
included in sales and marketing expense we re $34.5 million,
$28.0 million and $26.8 million in fiscal 1996, 1995 and 1994,
re s p e c t i ve l y.
Cash Eq u i valents and Sh o rt - Te rm In vestments Symantec con-
siders investments in highly liquid instruments purchased with
an original maturity of 90 days or less to be cash equivalents. All
of the Company’s cash equivalents and short-term i n ve s t m e n t s ,
consisting principally of commercial paper, corporate notes and
c e r tificates of deposit, are classified as available-for-sale as of the
balance sheet date. These securities are re p o rted at amort i ze d
cost, which approximates fair value, and there f o re, there are n o
u n re a l i zed gains and losses included in stockholders’ equity.
Re a l i z ed gains and losses and declines in value judged to be other-
t h a n - t e m p o r a ry are included in interest income. The cost of
securities sold is based upon the specific identification method.
In ventories In ventories are valued at the lower of cost or mark e t .
Cost is principally determined using currently adjusted standard s ,
which approximate actual cost on a first-in, first-out basis.
Equipment and Leasehold Im p rovements Equipment and
leasehold improvements are stated at cost, net of accumulated