Symantec 2004 Annual Report Download - page 56

«54»SYMANTEC CORPORATION
Acquired Product Rights Acquired product rights are comprised
of purchased product rights, technologies, databases and revenue
related order backlog and contracts from acquired companies.
Acquired product rights are stated at cost less accumulated amor-
tization. Amortization of acquired product rights is provided on a
straight-line basis over the estimated useful lives of the respective
assets, generally one to five years, and is primarily included in
Cost of revenues in the Consolidated Statements of Operations.
On April 1, 2002, we adopted Statement of Financial Accounting
Standards, or SFAS, No. 142, Goodwill and Other Intangibles. As
a result, the net balance of workforce-in-place, that was previously
included in acquired product rights, was reclassified to goodwill
and is no longer amortized, but is subject to impairment testing
at least annually.
Goodwill and Other Intangible Assets We account for goodwill
and other intangible assets in accordance with SFAS No. 142.
SFAS No. 142 requires that goodwill and identifiable intangible
assets with indefinite useful lives no longer be amortized, but
instead be tested for impairment at least annually. SFAS No. 142
also requires that intangible assets with estimable useful lives be
amortized over their respective estimated useful lives and reviewed
for impairment in accordance with SFAS No. 144, Accounting for
the Impairment or Disposal of Long-Lived Assets. On April 1, 2002,
we ceased the amortization of goodwill, in accordance with SFAS
No. 142, and will test goodwill annually for impairment or more
frequently if events and circumstances warrant.
Long-Lived Assets On April 1, 2002, we adopted SFAS No. 144
which requires that long-lived and intangible assets, including
property, equipment, leasehold improvements and acquired product
rights, be evaluated for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset
may not be recoverable. An impairment 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. Assets to be disposed of would be
separately presented in the balance sheet and reported at the
lower of the carrying amount or fair value less costs to sell, and
no longer depreciated. The assets and liabilities of a disposal
group classified as held for sale would be presented separately
in the appropriate asset and liability sections of the balance
sheet. The adoption of this standard did not have an effect on
our financial position or our operating results.
Income Taxes The provision for income taxes is computed using
the liability method, under which deferred tax assets and liabilities
are recognized for the expected future tax consequences of tem-
porary differences between the financial reporting and tax bases
of assets and liabilities and of net operating loss and tax credit
carryforwards. Deferred tax assets are reduced by a valuation
allowance when it is more likely than not that some portion or all
of the deferred tax assets will not be realized.
Net Income (Loss) Per Share Basic net income (loss) per share
is computed using the weighted average number of common
shares outstanding during the periods. Diluted net income (loss)
per share is computed using the weighted average number of
common shares outstanding and potentially dilutive common shares
outstanding during the periods. Potentially dilutive common
shares include the assumed conversion of all of the outstanding
convertible subordinated notes and assumed exercising of stock
options using the treasury stock method, if dilutive in the period.
Potentially dilutive common shares are excluded in net loss periods,
as their effect would be antidilutive.
Stock-Based Compensation We elected to follow APB No. 25,
Accounting for Stock Issued to Employees, in accounting for
our employee stock options because the alternative fair value
accounting provided for under SFAS No. 123, Accounting for
Stock-Based Compensation, requires the use of option valuation
models that were not developed for use in valuing employee
stock options.
We account for stock-based compensation awards to employees
using the intrinsic value method in accordance with Accounting
Principles Board Opinion, or 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, or FASB, Interpretation
No. 44, Accounting for Certain Transactions Involving Stock
Compensation, an interpretation of APB No. 25. Our stock plans
are described in Note 12. Under APB No. 25, because the exercise
price of our employee stock options generally equals the market
price of the underlying stock on the date of grant, no compensation
expense is recognized in our consolidated financial statements.
Pro forma information regarding net income (loss) and net income
(loss) per share is required by SFAS No. 123. This information is
required to be determined as if we had accounted for our employee
stock options, including shares issued under the Employee Stock
Purchase Plan, collectively called options, granted subsequent
to March 31, 1995 under the fair value method of that statement.
2004 Annual Report