Symantec 1999 Annual Report Download - page 68

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SYMANTEC CORPORATION
Summary of Significant Accounting Policies, Continued
54
channels. We offer the right of return of its products under various policies. We estimate and maintain reserves for
product returns. Under SOP 97-2, we recognize revenue upon shipment when no significant vendor obligations
remain and collection of the receivable, net of provisions for estimated returns, is probable.
Revenues related to significant post-contract support agreements (generally product maintenance agreements) are
deferred and recognized over the period of the agreements. The estimated cost for providing insignificant post-
contract support (generally telephone support) is accrued at the time of the sale and is included in sales and
marketing expense.
Royalty revenues are recognized as earned unless collection of such revenues is not assured. When collection is not
assured, revenues are recognized as payments are received.
Cash Equivalents, Investments and Restricted Investments
Symantec considers investments in highly liquid instruments purchased with an original maturity of 90 days or less to
be cash equivalents. All of our cash equivalents, short-term investments, long-term investments and restricted
investments are classified as available-for-sale as of the balance sheet dates. These securities are reported at fair
market value and any unrealized gains and losses are included in stockholders’ equity. Realized gains and losses and
declines in value judged to be other-than-temporary are included in interest income. The cost of securities sold is
based upon the specific identification method.
Derivative Financial Instruments
Symantec utilizes natural hedging to mitigate our foreign currency exposures and hedges certain residual exposures
through the use of one-month foreign exchange forward contracts. We enter into foreign exchange forward contracts
with financial institutions primarily to minimize currency exchange risks associated with certain balance sheet
positions. Gains and losses on the contracts are included in other income (loss) in the period as gains and losses on
the underlying transactions are recognized and generally offset. The fair value of foreign currency exchange forward
contracts approximates cost due to the short maturity periods.
Inventories
Inventories are valued at the lower of cost or market. Cost is principally determined using currently adjusted
standards, which approximate actual cost on a first-in, first-out basis.
Equipment and Leasehold Improvements
Equipment and leasehold improvements are stated at cost, net of accumulated depreciation and amortization.
Depreciation and amortization is provided on a straight-line basis over the estimated useful lives of the respective
assets, generally the shorter of the lease term or three to seven years.
Purchased product rights and capitalized software
Purchased product rights, technologies and capitalized software are comprised of acquired software (“product
rights”) and are stated at cost less accumulated amortization. Amortization is provided on a straight-line basis over
the estimated useful lives of the respective assets, generally three to five years.
Goodwill
Goodwill is created through acquisitions and is stated at cost less accumulated amortization. Amortization is
provided on a straight-line basis over the estimated useful lives of the respective assets, generally four to five years.
Income Taxes
Income taxes are computed in accordance with Statement of Financial Accounting Standards (SFAS) No. 109,
“Accounting for Income Taxes.”
Net Income Per Share
In 1997, the Financial Accounting Standards Board (FASB) issued SFAS No. 128, “Accounting for Earnings Per
Share,” (“SFAS 128”). SFAS 128 replaced the calculation of primary and fully diluted net income per share with
basic and diluted net income per share.
Basic net income per share is computed using the weighted average number of common shares outstanding during
the periods. Diluted net income per share is computed using the weighted average number of common shares
outstanding and potentially dilutive common shares during the periods. Diluted earnings per share includes the