Symantec 2001 Annual Report Download - page 38

During the fourth quarter of fiscal 2001, we adopted Staff Accounting
Bulletin (“SAB”) No. 101, Revenue Recognition in Financial Statements.
The adoption of SAB No. 101 did not have a material effect on our
consolidated statement of financial position or results of operations
and no restatement of prior quarters was necessary.
Cash Equivalents, Short-term Investments and Restricted
Investments We consider 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 investment, 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, net of applicable tax effects, are
included as a component in stockholders’equity, as accumulated
other comprehensive income (loss). Realized gains and losses on cash
equivalents, short-term investments, and restricted investments are
included in interest income. Realized gains and losses and declines in
value judged to be other than temporary on equity investments are
included in other income (expense). The cost of securities sold is based
upon the specific identification method.
Derivative Financial Instruments We utilize natural hedging to
mitigate our foreign currency exposures and hedge certain residual
exposures through the use of one-month foreign currency forward
exchange contracts. We enter into foreign currency forward exchange
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 (expense) in the
period that gains and losses on the underlying transactions are recog-
nized and generally offset. The fair value of foreign currency forward
exchange 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. Inventory consists
of raw materials and finished goods.
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.
Acquired Product Rights Acquired product rights are comprised of
purchased product rights, technologies and workforce-in-place, and
capitalized software 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 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
goodwill, generally four to five years.
Long-Lived Assets Long-lived assets, including equipment, leasehold
improvements, aquired product rights, and goodwill, are evaluated for
impairment whenever events or changes in circumstances indicate that
the carrying amount of an asset may not be recoverable. An impair-
ment loss would be recognized when the sum of the undiscounted
future net cash flows expected to result from the use of the asset and its
eventual disposition is less than its carrying amount. Such impairment
loss would be measured as the difference between the carrying amount
of the asset and its fair value based on the present value of estimated
future cash flows. No impairments have 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.
Stock-Based Compensation We account for stock-based awards to
employees using the intrinsic value method in accordance with
Accounting Principles Board Opinion (“APB”) No. 25, Accounting for
Stock Issued to Employees, and to nonemployees using the fair value
method in accordance with SFAS No. 123, Accounting for Stock-Based
Compensation. In addition, we apply applicable provisions of Financial
Accounting Standards Board (“FASB”) Interpretation (“FIN”) No. 44,
Accounting for Certain Transactions Involving Stock Compensation,
an interpretation of APB No. 25.
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 poten-
tially dilutive common shares during the periods. Diluted net income
per share also includes the assumed conversion of all of the outstand-
ing convertible subordinated debentures and assumed exercising of
options, if dilutive in the period.
Concentrations of Credit Risk Our product revenues are concen-
trated in the software industry, which is highly competitive and rapidly
changing. Significant technological changes in the industry or cus-
tomer 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 nonper-
formance by independent agents or distributors could adversely affect
operating results.
Financial instruments that potentially subject us to concentrations of
credit risk consist principally of cash equivalents, short-term invest-
ments, restricted investments and trade accounts receivable. 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 evaluation process, reasonably short collection
terms and the geographical dispersion of sales transactions. We main-
tain reserves for potential credit losses and such losses have been
within management’s expectations.
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