Symantec 2009 Annual Report Download - page 142

In accordance with SFAS No. 142, we apply a fair value based impairment test to the net book value of
goodwill and indefinite-lived intangible assets on an annual basis and on an interim basis, whenever events or
changes in circumstances indicate that the carrying value of goodwill or indefinite-lived intangible assets may not
be recoverable and an impairment loss may have been incurred.
When a potential impairment of goodwill is indicated, we determine the carrying value of the assets and
liabilities related to identified reporting units, including an allocation of goodwill, and estimate the respective fair
value of our reporting units. The specific analysis of a potential goodwill impairment then requires a two-step
process. The first step of evaluating impairment involves determining if the estimated fair value of each reporting
unit is less than its carrying value, in which case we then perform the second step of the goodwill impairment
analysis. The second step requires estimating the fair value of all identifiable assets and liabilities of the respective
reporting unit, in a manner similar to a purchase price allocation for an acquired business. An impairment loss is
then recognized for the amount by which the carrying value of the reporting unit’s goodwill exceeds its implied fair
value.
As noted in the Summary of Significant Accounting Policies, the calculation of potential goodwill impairment
requires significant judgment at many points during the analysis. In determining the carrying value of the reporting
units, we applied judgment to allocate assets and liabilities, such as accounts receivable and property, plant and
equipment, based on the specific identification or relevant driver, as they are not held by those reporting units but by
functional departments. Furthermore, for the reporting units with recognized goodwill for the purposes of our
analysis, we utilize the income approach, under which we calculate fair value based on the estimated discounted
future cash flows of that specific reporting unit. The income approach was determined to be the most representative
valuation technique that would be utilized by a market participant in an assumed transaction, but we also consider
the market approach which measures the value of an asset through an analysis of recent sales or offerings of
comparable property. When applied to the valuation of equity interests, consideration is given to the financial
condition and operating performance of the company being appraised relative to those of publicly traded companies
operating in the same or similar lines of business, potentially subject to corresponding economic, environmental,
and political factors and considered to be reasonable investment alternatives. We also consider our market
capitalization on the date we perform our analysis as compared to the sum of the fair values of our reporting
units to assess the reasonableness of the values of the reporting units determined under the income approach.
The income approach requires us to make estimates and judgments about the future cash flows of each
reporting unit as well as discount rates to be applied. Although our cash flow forecasts are based on assumptions that
are consistent with the plans and estimates we are using to manage the underlying reporting units, there is
significant judgment in determining the cash flows attributable to these reporting units. As a result of the downturn
in the economic environment during the second half of calendar 2008, determining the fair value of the individual
reporting units is even more judgmental than in the past. In particular, the global economic recession has reduced
our visibility into long-term trends, and consequently, estimates of future cash flows used in the current year
analyses are lower than those used in the prior year analysis. The discount rates utilized in the analysis also reflect
market-based estimates of the risks associated with the projected cash flows of individual reporting units and were
increased from the prior year analysis to reflect increased risk due to current volatility in the economic environment.
Our reporting units are identified in accordance with SFAS No. 142 and are either equivalent to, or represent
one level below, an operating segment, which constitute a business for which discrete financial information is
available and for which segment management regularly reviews the operating results. Our operating segments are
significant strategic business units that offer different products and services, distinguished by customer needs. Our
reporting units are consistent with our operating segments, except for the Services segment, which includes the
SaaS and the Services reporting units. The SaaS reporting unit is new for fiscal 2009 and was primarily the result of
an acquisition during the year.
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SYMANTEC CORPORATION
Notes to Consolidated Financial Statements — (Continued)