Symantec 2007 Annual Report Download - page 81

Indirect channel sales
For our Consumer Products segment, we sell packaged software products through a multi-tiered distribution
channel. We also sell electronic download and packaged products via the Internet. We separately sell annual content
update subscriptions directly to end-users primarily via the Internet. As a result of increases in subscription pricing
for our consumer products that include content updates, we recognize revenue for these products ratably over the
term of the subscription upon sell-through to end-users. For most other consumer products, we recognize package
product revenue on distributor and reseller channel inventory that is not in excess of specified inventory levels in
these channels. We offer the right of return of our products under various policies and programs with our
distributors, resellers, and end-user customers. We estimate and record reserves for product returns as an offset to
revenue. We fully reserve for obsolete products in the distribution channel as an offset to deferred revenue.
For our Security and Data Management and Data Center Management segments, we generally recognize
revenue from licensing of software products through our indirect sales channel upon sell-through or with evidence
of an end-user. For licensing of our software to OEMs, royalty revenue is recognized when the OEM reports the sale
of the software products to an end-user customer, generally on a quarterly basis. In addition to license royalties,
some OEMs pay an annual flat fee and/or support royalties for the right to sell maintenance and technical support to
the end-user. We recognize revenue from OEM support royalties and fees ratably over the term of the support
agreement.
We offer channel and end-user rebates for our products. 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 based on the terms and conditions of the promotional program, 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 estimate and record reserves for channel and end-user rebates as an offset to revenue. For
consumer products that include content updates, rebates are recorded as a ratable offset to revenue over the term of
the subscription.
Cash Equivalents and Short-Term Investments
We classify our cash equivalents and short-term investments in accordance with Statement of Financial
Accounting Standards, or SFAS, No. 115, Accounting for Certain Investments in Debt and Equity Securities. We
consider investments in instruments purchased with an original maturity of 90 days or less to be cash equivalents.
We classify our short-term investments as available-for-sale, and short-term investments consist of marketable debt
or equity securities with original maturities in excess of 90 days. Our cash equivalents and short-term investment
portfolios consist primarily of money market funds, commercial paper, corporate debt securities, asset-backed debt
securities, and U.S. government and government-sponsored debt securities. Our short-term investments do not
include equity investments in privately held companies. Our short-term investments are reported at fair value with
unrealized gains and losses, net of tax, included in Accumulated other comprehensive income within Stockholders’
equity in the Consolidated Balance Sheets. The amortization of premiums and discounts on the investments,
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 Statements of Income. We use the specific
identification method to determine cost in calculating realized gains and losses upon sale of short-term investments.
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. Additions to the
allowance for doubtful accounts are recorded as General and administrative expenses. We review our trade
receivables by aging category to identify specific customers with known disputes or collectibility issues. In
addition, we maintain an allowance for all other receivables not included in the specific reserve by applying specific
percentages of projected uncollectible receivables to the various aging categories. In determining these percentages,
we analyze our historical collection experience and current economic trends. We exercise judgment when
determining the adequacy of these reserves as we evaluate historical bad debt trends, general economic conditions
75