Symantec 1996 Annual Report Download - page 35

depreciation and amortization. Depreciation and amortization
is provided on a straight-line basis over the estimated useful
l i v es of the re s p e c t i ve assets, generally the shorter of the lease
term or three to seven years.
Purchased Intangibles Purchased intangibles are comprised of
acquired software (“product rights”) and are stated at cost less
accumulated amortization. Amortization is provided on the
greater of the straight-line basis over the estimated useful lives
of the respective assets, generally three to five years, or on the
basis of the ratio of current revenues to current revenues plus
anticipated future revenues.
Research and Development Expenses Research and develop-
ment expenditures are charged to operations as incurre d .
Financial accounting rules requiring capitalization of cert a i n
s o f t w a re development costs have not materially affected the
Company, except for amounts capitalized by Delrina prior to its
acquisition by Symantec. Delrina did not capitalize any soft-
w a re development costs in fiscal 1996 and capitalized $6.3
million and $2.6 million in software development costs in fiscal
years 1995 and 1994, re s p e c t i ve l y. T he related amort i z a t i o n
expense was $5.6 million, $4.0 million and $1.9 million in fis-
cal 1996, 1995 and 1994, respectively.
Income Taxes Income taxes are computed in accordance with
Statement of Financial Accounting St a n d a r ds No. 109,
“Accounting for Income Taxes.”
Net Income (Loss) Per Share Net income (loss) per share is
calculated using the tre a s u ry stock or the modified tre a s u ry
stock method, as applicable, if dilutive. Common stock equiva-
lents are attributable to outstanding stock options. Fully diluted
earnings per share includes the assumed conversion of all of the
outstanding convertible subordinated debentures.
Concentrations of Credit Risk The Company’s product rev-
enues are concentrated in the personal computer software
i n d u s t ry, which is highly competitive and rapidly changing.
Significant technological changes in the industry or customer
re q u i rements, or the emergence of competitive products with
new capabilities or technologies, could adversely affect operat-
ing results. In addition, a significant portion of the Company’s
revenue and net income is derived from international sales and
independent agents and distributors. Fluctuations of the U . S .
dollar against foreign currencies, changes in local regulatory or
economic conditions, piracy or nonperformance by indepen-
dent agents or distributors could adversely affect operating
results.
Financial instruments that potentially subject the Company
to concentrations of credit risk consist principally of short-term
i n vestments and trade accounts re c e i vable. The Company’s
i n vestment portfolio is diversified and consists of inve s t m e n t
grade A-1/P-1 securities. The credit risk in the Company’s trade
accounts receivable is substantially mitigated by the Company’s
credit evaluation process, reasonably short collection terms and
the geographical dispersion of sales transactions.
Ad ve rtising Ad ve rtising expenditures are charged to operations
as incurred except for certain direct mail campaigns which are
c a p i t a l i zed and amort i zed over the expected period of benefit or
t we l ve months, whichever is short e r. Capitalized adve rt i s i n g
costs have not been material in all periods presented. Ad ve rt i s i n g
expense for fiscal 1996, 1995 and 1994 was approx i m a t e l y
$43.0 million, $41.0 million and $38.6 million, re s p e c t i ve l y.
Recent Pronouncements During March 1995, the Financial
Accounting St a n d a rds Board issued Statement No. 121,
“Accounting for the Impairment of Long-Lived Assets and for
L o n g - L i ved Assets to be Disposed Of” (“S FA S No. 121”), which
requires the review for impairment of long-lived assets, certain
identifiable intangibles and goodwill related to those assets
whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. In certain
situations, an impairment loss would be re c o g n i zed. T h e
Company does not believe that adoption of S FA S No. 121,
which will become effective for the Company’s 1997 fiscal year,
will have a material impact on its financial condition or operat-
ing results.
During October 1995, the Financial Accounting St a n d a rd s
Board issued Statement No. 123, “Accounting for Stock-Based
Compensation” (“SFAS No. 123”). This standard, which estab-
lishes a fair value-based method for stock-based compensation
plans, also permits an election to continue following the
re q u i rements of A P B Opinion No. 25, “Accounting for St o c k
Issued to Employees,” with disclosures of pro-forma net income
and earnings per share under the new method. The Company
will continue following the requirements of APB Opinion No.
25, with disclosure of pro-forma information. The disclosure
re q u i rements of S F A S No. 123 will be effective for the
Company’s 1997 fiscal year.
Reclassifications C e rtain previously re p o rted amounts have
been reclassified to conform to the current presentation format.