Symantec 2004 Annual Report Download - page 55

SYMANTEC CORPORATION «53»
Our services include managed security services, consulting and
education. We recognize managed security services revenue ratably
over the period that such contracted services are provided. We
recognize consulting services revenue as services are performed
or upon written acceptance from customers, if applicable. We
recognize education services revenue as services are performed.
In arrangements that include multiple elements, including perpetual
software licenses and maintenance and/or services and packaged
products with content updates, we allocate and defer revenue for
the undelivered items based on vendor-specific objective evidence,
or VSOE, of fair value of the undelivered elements, and recognize
the difference between the total arrangement fee and the amount
deferred for the undelivered items as revenue. Our deferred revenue
consists primarily of the unamortized balance of enterprise product
maintenance and consumer product content updates.
VSOE of each element is based on the price for which the
undelivered element is sold separately. We determine fair value
of the undelivered elements based on historical evidence of
our stand-alone sales of these elements to third parties. When
VSOE does not exist for undelivered items such as maintenance,
then the entire arrangement fee is recognized ratably over the
performance period.
Cash Equivalents and Short-term Investments We consider
investments in highly liquid instruments purchased with an original
maturity of 90 days or less to be cash equivalents. Our short-term
investments, classified as available-for-sale as of the respective
balance sheet dates, are reported at fair value with unrealized
gains and losses, net of tax, included in Accumulated other com-
prehensive income (loss) within Stockholders’ Equity on the
Consolidated Balance Sheet. Realized gains and losses and declines
in value judged to be other than temporary on available-for-sale
securities are included in Other income (expense), net in the
Consolidated Statement of Operations. The cost of securities sold
is based upon the specific identification method.
Trade Accounts Receivable Trade accounts receivable are recorded
at the invoiced amount and are not interest bearing. We maintain
an allowance for doubtful accounts to reserve for potentially
uncollectible trade receivables. We also review our trade receivables
by aging category to identify specific customers with known
disputes or collectibility issues. We exercise judgment when
determining the adequacy of these reserves as we evaluate
historical bad debt trends, general economic conditions in the
United States and internationally, and changes in customer
financial conditions.
Equity Investments We have equity investments in privately held
companies for business and strategic purposes. These investments
are included in Other long-term assets on the Consolidated
Balance Sheet and are accounted for under the cost method as
we do not have significant influence over these investees. Under
the cost method, the investment is recorded at its initial cost and
is periodically reviewed for impairment. We regularly review
our investees’ actual and forecasted operating results, financial
position and liquidity, and business and industry factors in assessing
whether a decline in value of an equity investment has occurred
that is other than temporary. When such a decline in value is
identified, the fair value of the equity investment is estimated
based on the preceding factors and an impairment loss is recognized
in Other income (expense), net in the Consolidated Statement
of Operations.
Derivative Financial Instruments We utilize some natural hedging
to mitigate our foreign currency exposures and we manage certain
residual exposures through the use of one-month forward foreign
exchange contracts. We enter into forward foreign exchange
contracts with high-quality financial institutions primarily to minimize
currency exchange risks associated with certain balance sheet
positions denominated in foreign currencies. Gains and losses on
the contracts are included in Other income (expense), net in the
Consolidated Statement of Operations in the period that gains
and losses on the underlying transactions are recognized. The
gains and losses on the contracts generally offset the gains and
losses on the underlying transactions. The fair value of forward
foreign 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.
Property, Equipment and Leasehold Improvements Property,
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 as follows:
•computer hardware and software—two to three years;
•office furniture and equipment—three to five years;
•leasehold improvements—the shorter of the lease term
or seven years; and
•buildings—twenty five to thirty years.
2004 Annual Report