Symantec 2000 Annual Report Download - page 37

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 for-
ward 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 in the period that 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 lease-
hold 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 com-
prised 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 respec-
tive assets, generally three to five years.
Goodwill Goodwill is recorded 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. Reviews are regularly performed
to determine whether facts or circumstances exist which indicate
that the carrying values of assets are impaired. Impairment, if any, is
based on the excess of the carrying amount over the fair value of
the assets. No impairment has been indicated to date.
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 Basic net income per share is computed
using the weighted average number of common shares outstand-
ing during the periods. Diluted net income per share is computed
using the weighted average number of common shares outstand-
ing and potentially dilutive common shares during the periods.
Diluted net income per share also includes the assumed conver-
sion of all of the outstanding convertible subordinated debentures
and assumed exercising of options, if dilutive in the period.
Concentrations of Credit Risk Symantec’s product revenues
are concentrated in the software industry, which is highly com-
petitive and rapidly changing. Significant technological changes
in the industry or customer requirements, or the emergence of
competitive products with new capabilities or technologies, could
adversely affect operating results. In addition, a significant portion
of our revenues 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 independent
agents or distributors could adversely affect operating results.
Financial instruments that potentially subject us to concentrations
of credit risk consist principally of short-term and long-term
investments, restricted investments and trade accounts receiv-
able. Our investment portfolio is diversified and consists of
investment grade securities. We are exposed to credit risks in the
event of default by these institutions to the extent of the amount
recorded on the balance sheet. The credit risk in our trade
accounts receivable is substantially mitigated by our credit evalua-
tion process, reasonably short collection terms and the
geographical dispersion of sales transactions. We generally do not
require collateral and maintain reserves for potential credit losses
and such losses have been within management’s expectations.
Legal Expenses We accrue estimated legal expenses for law-
suits only when both of the conditions of SFAS No. 5, Accounting
for Contingencies, are met. Costs for external attorney fees are
accrued when the likelihood of the incurrence of the related costs
is probable and management has the ability to estimate such
costs. If both of these conditions are not met, management
records the related legal expenses when incurred. Amounts
accrued by us are not discounted. The material assumptions used
to estimate the amount of legal expenses include:
•The monthly legal expense incurred by our external attor-
neys on the particular case being evaluated;
•Communication between us and our external attorneys on
the expected duration of the lawsuit and the estimated
expenses during that time;
•Our intentions regarding these lawsuits, e.g. to defend vig-
orously, to take to trial and the minimum amounts
within the estimated range for which we would be willing
to settle if settlement discussions were to occur;
•Deductible amounts under our insurance policies; and
•Past experiences with similar lawsuits.
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