Symantec 2009 Annual Report Download - page 91

differ from our estimates, material differences may result in the amount and timing of our net revenues for any
period presented.
Valuation of goodwill, intangible assets and long-lived assets
When we acquire businesses, we allocate the purchase price to tangible assets and liabilities and identifiable
intangible assets acquired. Any residual purchase price is recorded as goodwill. The allocation of the purchase price
requires management to make significant estimates in determining the fair values of assets acquired and liabilities
assumed, especially with respect to intangible assets. These estimates are based on historical experience and
information obtained from the management of the acquired companies. These estimates can include, but are not
limited to, the cash flows that an asset is expected to generate in the future, the appropriate weighted-average cost of
capital, and the cost savings expected to be derived from acquiring an asset. These estimates are inherently
uncertain and unpredictable. In addition, unanticipated events and circumstances may occur which may affect the
accuracy or validity of such estimates.
Goodwill. As of April 3, 2009, goodwill was $4.6 billion. We review goodwill for impairment on an annual
basis and on an interim basis whenever events or changes in circumstances indicate that the carrying value may not
be recoverable in accordance with SFAS No. 142, Goodwill and Other Intangible Assets (“SFAS No. 142”). The
provisions of SFAS No. 142 require that a two-step impairment test be performed on goodwill. In the first step, we
compare the estimated fair value of each reporting unit to its allocated carrying value (book value). If the carrying
value of the reporting unit exceeds the fair value of the equity assigned to that unit, there is an indicator of
impairment and we must perform the second step of the impairment test, which requires determining the implied
fair value of that reporting unit’s goodwill in a manner similar to a purchase price allocation for an acquired
business. If the carrying value of the reporting unit’s goodwill exceeds its implied fair value, then we would record
an impairment loss equal to the excess.
Our reporting units are identified in accordance with SFAS No. 142 and are either equivalent to, or represent
one level below, an operating segment. Each reporting unit constitutes 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.
Prior to performing our second step in the goodwill impairment analysis, we perform an assessment of long-
lived assets for impairment. Such long-lived assets include tangible and intangible assets recorded in accordance
with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets and SFAS No. 86, Accounting
for the Costs of Software to Be Sold, Leased of Otherwise Marketed.
The process of evaluating the potential impairment of goodwill requires significant judgment at many points
during the analysis. In determining the carrying value of the reporting units, we had to apply judgment to allocate
the assets and liabilities, such as accounts receivable and property and equipment, based on specific identification or
relevant driver, as they are not held by those reporting units but by functional departments. Goodwill was allocated
to the reporting units based on a combination of specific identification and relative fair values, which is consistent
with the methodology utilized in the prior year impairment analysis. The use of relative fair values was necessary
for certain reporting units due to changes in our operating structure in prior years. Furthermore, to determine the
reporting units’ fair value, we use the income approach under which we calculate the fair value of each reporting
unit based on the estimated discounted future cash flows of that 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 the results are corroborated with 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. Significant assumptions are based on
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