Symantec 2004 Annual Report Download - page 29

SYMANTEC CORPORATION «27»
estimates, material differences may result in the amount and timing
of our net revenues for any period presented. More or less product
may be returned from what was estimated and/or the amount of
inventory in the channel could be different than what is estimated.
These factors and unanticipated changes in the economic and
industry environment could make our return estimates differ from
actual results.
Reserves for Rebates We estimate and record reserves as an offset
to revenue for channel and end-user rebates, related primarily to
products within our Consumer Products, Enterprise Security and
Enterprise Administration segments. Our estimated reserves for
channel volume incentive rebates are based on distributors’ and
resellers’ actual performance against the terms and conditions
of volume incentive rebate programs, which are typically entered
into quarterly. Our reserves for end-user rebates are estimated
on the terms and conditions of the promotional programs, actual
sales during the promotion, amount of actual redemptions
received, historical redemption trends by product and by type
of promotional program and the value of the rebate. We also
consider current market conditions and economic trends when
estimating our reserves for rebates. If we made different estimates,
material differences may result in the amount and timing of our
net revenues for any period presented.
Business Combinations When we acquire businesses, we allocate
the purchase price to tangible assets and liabilities acquired
and identifiable intangible assets. Any residual purchase price
is recorded as goodwill. We engage independent third-party
appraisal firms to assist in determining the fair values of assets
acquired and liabilities assumed. Such a valuation requires
management to make significant estimates, especially with
respect to intangible assets. These estimates are based on historical
experience and information obtained from the management of
the acquired companies. These estimates can include, but are not
limited to, the cash flows that an asset is expected to generate
in the future, the appropriate weighted average cost of capital,
and the cost savings expected to be derived from acquiring an
asset. These estimates are inherently uncertain and unpredictable.
In addition, unanticipated events and circumstances may occur
which may affect the accuracy or validity of such estimates.
At March 31, 2004, goodwill was $1.1 billion, acquired product
rights was $121 million, and other identifiable intangible assets
was $10 million. We assess the impairment of goodwill within our
reportable units annually, or more often if events or changes in
circumstances indicate that the carrying value may not be recov-
erable. We assess the impairment of acquired product rights
and other identifiable intangible assets whenever events or changes
in circumstances indicate that its carrying amount may not be
recoverable. An impairment loss would be recognized when the
sum of the discounted 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. The estimate of cash flow is based upon, among
other things, certain assumptions about expected future operating
performance and an appropriate discount rate determined by our
management. Our estimates of discounted cash flows may differ
from actual cash flows due to, among other things, economic
conditions, changes to the business model or changes in operating
performance. If we made different estimates, material differences
may result in write-downs of net long-lived and intangible assets,
which would be reflected by charges to our operating results for
any period presented.
Accounting for Excess Facilities We have estimated expenses
for excess facilities related to consolidating, moving and relocating
various groups or sites as a result of restructuring activities and
business acquisitions. In determining our estimates, we obtained
information from third-party leasing agents to calculate anticipated
third-party sublease income and the vacancy period prior to finding
a sub-lessee. Market conditions will affect our ability to sublease
facilities on terms consistent with our estimates. Our ability to
sublease facilities on schedule or to negotiate lease terms resulting
in higher or lower sublease income than estimated will affect our
accrual for site closures. Differences between estimates of related
broker commissions, tenant improvements and related exit costs
may increase or decrease our accrual upon final negotiation. If we
made different estimates regarding these various components
of our excess facilities costs, the amount recorded for any period
presented could vary materially from those actually recorded.
Income Taxes We make significant estimates to determine our
current provision for income taxes, as well as deferred tax assets
and liabilities and our income taxes payable. Our estimates relative
to the current provision for income taxes take into account current
tax laws, our interpretation of current tax laws and possible outcomes
of current and future audits conducted by foreign and domestic
tax authorities. Changes in tax laws or our interpretation of tax laws
and the resolution of current and future tax audits could significantly
impact the amounts provided for income taxes in our financial
position and results of operations.
We also assess the likelihood that our net-deferred tax assets will
be realized. Realization of our net-deferred tax assets is dependent
upon future United States taxable income and future taxable
income in certain foreign jurisdictions, as well as our implementation
of prudent and feasible tax planning strategies. Our estimates
regarding future profitability may change due to future market
conditions, changes in United States or international tax laws and
other factors. To the extent we believe it is more likely than not
2004 Annual Report