Symantec 2008 Annual Report Download - page 116

forfeitures differ from those estimates. We estimate forfeitures of stock options, RSUs, and ESPP purchase rights at
the time of grant based on historical experience and record compensation expense only for those awards that are
expected to vest. All stock-based awards are amortized on a straight-line basis over the requisite service periods of
the awards, which are generally the vesting periods.
If factors change and we employ different assumptions for estimating stock-based compensation expense in
future periods or if we decide to use a different valuation model, the amount of such expense recorded in future
periods may differ significantly from what we have recorded in the current period.
The Black-Scholes option-pricing model was developed for use in estimating the fair value of traded options
that have no vesting restrictions and are fully transferable, characteristics not present in our option grants. Existing
valuation models, including the Black-Scholes and lattice binomial models, may not provide reliable measures of
the fair values of our stock-based compensation. Consequently, there is a risk that our estimates of the fair values of
our stock-based compensation awards on the grant dates may bear little resemblance to the actual values realized
upon the exercise, expiration, early termination, or forfeiture of those stock-based payments in the future. Certain
stock-based payments, such as employee stock options, may expire worthless or otherwise result in zero intrinsic
value as compared to the fair values originally estimated on the grant date and reported in our financial statements.
Alternatively, value may be realized from these instruments that is significantly higher than the fair values
originally estimated on the grant date and reported in our financial statements.
The application of these principles may be subject to further interpretation and refinement over time. There are
significant differences among valuation models, and there is a possibility that we will adopt different valuation
models in the future. This may result in a lack of consistency in future periods and materially affect the fair value
estimate of stock-based payments. It may also result in a lack of comparability with other companies that use
different models, methods, and assumptions.
Stock-based compensation expense related to employee stock options, RSUs, and employee stock purchases
recognized under SFAS No. 123R for the year ended March 28, 2008 was $164 million.
Contingencies and Litigation
We evaluate contingent liabilities including threatened or pending litigation in accordance with SFAS No. 5,
“Accounting for Contingencies”. We assess the likelihood of any adverse judgments or outcomes from a potential
claim or legal proceeding, as well as potential ranges of probable losses, when the outcomes of the claims or
proceedings are probable and reasonably estimable. A determination of the amount of accrued liabilities required, if
any, for these contingencies is made after the analysis of each separate matter. Because of uncertainties related to
these matters, we base our estimates on the information available at the time of our assessment. As additional
information becomes available, we reassess the potential liability related to its pending claims and litigation and
may revise our estimates. Any revisions in the estimates of potential liabilities could have a material impact on our
operating results and financial position. As of March 28, 2008, we recognized a loss for the pending settlement of a
class action lawsuit related to a pre-acquisition contingency of Veritas for $21.5 million. The amount was
determined based upon existing facts and circumstances of the outcome and estimates that we could reasonably
and likely pay.
Income Taxes
We account for income taxes in accordance with SFAS No. 109, Accounting for Income Taxes. The provision
for income taxes is computed using the asset and liability method, under which deferred tax assets and liabilities are
recognized for the expected future tax consequences of temporary differences between the financial reporting and
tax bases of assets and liabilities, and for operating loss and tax credit carryforwards in each jurisdiction in which we
operate. Deferred tax assets and liabilities are measured using the currently enacted tax rates that apply to taxable
income in effect for the years in which those tax assets are expected to be realized or settled. We record a valuation
allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized.
We are required to compute our income taxes in each federal, state, and international jurisdiction in which we
operate. This process requires that we estimate the current tax exposure as well as assess temporary differences
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