Symantec 2007 Annual Report Download - page 82

in the U.S. and internationally, and changes in customer financial conditions. We also offset deferred revenue
against accounts receivable when channel inventories are in excess of specified levels and for transactions where
collection of a receivable is not considered probable.
Equity Investments
We have equity investments in privately held companies for business and strategic purposes. These invest-
ments are included in Other long-term assets in the Consolidated Balance Sheets 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 evaluated for impairment. During our review for impairment, we
examine the investees’ actual and forecasted operating results, financial position, and liquidity, as well as business/
industry factors in assessing whether a decline in value of an equity investment has occurred that is other-than-tem-
porary. 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
Statements of Income. In fiscal 2007, 2006, and 2005, we recognized impairment losses on our equity investments
of $3 million, $4 million, and an insignificant amount, respectively.
Each quarter we assess our compliance with accounting guidance, including the provisions of Financial
Accounting Standards Board Interpretation No., or FIN, 46R, Consolidation of Variable Interest Entities — An
Interpretation of ARB No. 51. Under FIN 46R, we must consolidate a variable interest entity if we have a variable
interest (or combination of variable interests) in the entity that will absorb a majority of the entity’s expected losses,
receive a majority of the entity’s expected residual returns, or both. Currently, our equity investments are not subject
to consolidation under FIN 46R.
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 asso-
ciated with certain balance sheet positions denominated in foreign currencies. We do not utilize derivative
instruments for trading or speculative purposes. Gains and losses on the contracts are included in Other income
(expense), net in the Consolidated Statements of Income in the period that gains and losses on the underlying
maturing forward transactions are recognized. The gains and losses on the contracts generally offset the gains and
losses on the underlying transactions. Changes in the fair value of forward foreign exchange contracts are included
in earnings. We do not hedge our foreign currency translation risk.
Inventories
Inventories are valued at the lower of cost or market. Cost is principally determined using the first-in, first-out
method. Inventory predominantly consists of finished goods as well as deferred costs of revenue. Deferred costs of
revenue were $40 million at March 31, 2007 and $41 million at March 31, 2006, of which $27 million and
$29 million, respectively, are related to consumer products that include content updates and will be recognized
ratably over the term of the subscription.
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 five years
• Office furniture and equipment — three to five years
• Leasehold improvements — the shorter of the lease term or seven years
• Buildings — twenty-five to thirty years
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