Symantec 2008 Annual Report Download - page 155

to our customers over a specified period of time, and we recognize the related revenue ratably over the maintenance,
subscription, or service period.
Content, subscriptions, and maintenance revenue also includes professional services revenue, which consists
primarily of the fees we earn related to consulting and educational services. We generally recognize revenue from
professional services as the services are performed or upon written acceptance from customers, if applicable,
assuming all other conditions for revenue recognition noted above have been met.
License revenue is derived primarily from the licensing of our various products and technology. We generally
recognize license revenue upon delivery of the product, assuming all other conditions for revenue recognition noted
above have been met.
We enter into perpetual software license agreements through direct sales to customers and indirect sales with
distributors and resellers. The license agreements generally include product maintenance agreements, for which the
related revenue is included with Content, subscriptions, and maintenance and is deferred and recognized ratably
over the period of the agreements.
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 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 license revenue. 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 or from the stated renewal rate for the
undelivered elements. When VSOE does not exist for undelivered items such as maintenance, the entire
arrangement fee is recognized ratably over the performance period. Our deferred revenue consists primarily of
the unamortized balance of enterprise product maintenance, consumer product content update subscriptions, and
arrangements where VSOE does not exist.
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. 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 Compliance and Storage and Server Management segments, we generally recognize
revenue from the 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, 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
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SYMANTEC CORPORATION
Notes to Consolidated Financial Statements — (Continued)