Symantec 2009 Annual Report Download - page 95

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
between the accounting and tax treatment of assets and liabilities, including items such as accruals and allowances
not currently deductible for tax purposes. The income tax effects of the differences we identify are classified as
current or long-term deferred tax assets and liabilities in our Consolidated Balance Sheets. Our judgments,
assumptions, and estimates relative to the current provision for income tax take into account current tax laws, our
interpretation of current tax laws, and possible outcomes of current and future audits conducted by foreign and
domestic tax authorities. Changes in tax laws or our interpretation of tax laws and the resolution of current and
future tax audits could significantly impact the amounts provided for income taxes in our Consolidated Balance
Sheets and Consolidated Statements of Operations. We must also assess the likelihood that deferred tax assets will
be realized from future taxable income and, based on this assessment, establish a valuation allowance, if required.
Our determination of our valuation allowance is based upon a number of assumptions, judgments, and estimates,
including forecasted earnings, future taxable income, and the relative proportions of revenue and income before
taxes in the various domestic and international jurisdictions in which we operate. To the extent we establish a
valuation allowance or change the valuation allowance in a period, we reflect the change with a corresponding
increase or decrease to our tax provision in our Consolidated Statements of Operations, or to goodwill to the extent
that the valuation allowance related to tax attributes of the acquired entities.
In July 2008, we reached an agreement with the Internal Revenue Service (“IRS”) concerning our eligibility to
claim a lower tax rate on a distribution made from a Veritas foreign subsidiary prior to the July 2005 acquisition. The
distribution was intended to be made pursuant to the American Jobs Creation Act of 2004, and therefore eligible for
a 5.25% effective U.S. federal rate of tax, in lieu of the 35% statutory rate. The final impact of this agreement is not
yet known since this relates to the taxability of earnings that are otherwise the subject of the tax years 2000-2001
transfer pricing dispute which in turn is being addressed in the U.S. Tax Court. To the extent that we owe taxes as a
result of the transfer pricing dispute, we anticipate that the incremental tax due from this negotiated agreement will
decrease. We currently estimate that the most probable outcome from this negotiated agreement will be $13 million
or less, for which an accrual has already been made. We made a payment of $130 million to the IRS for this matter in
May 2006. We applied $110 million of this payment as a deposit on the outstanding transfer pricing matter for the
tax years 2000-2001.
RESULTS OF OPERATIONS
Total Net Revenues
Fiscal
2009 $ %
Fiscal
2008 $ %
Fiscal
2007
2009 vs. 2008 2008 vs. 2007
($ in thousands)
Net revenues.............. $6,149,854 $275,435 5% $5,874,419 $675,053 13% $5,199,366
Net revenues increased for fiscal 2009 as compared to fiscal 2008 primarily due to a $301 million increase in
Content, subscriptions, and maintenance revenues. This increase was primarily related to increased revenues in our
Storage and Server Management and Services segments. In addition, revenues for fiscal 2009 benefited from
additional amortization of deferred revenue of approximately $75 million as a result of fiscal 2009 comprising
53 weeks as compared to 52 weeks in fiscal 2008. The global economic slowdown has increased competitive pricing
pressure and the lead time to close on sales for some of our products. While we cannot predict the intensity or
duration of this slowdown, we believe the recurring nature of our business and the mission-critical nature of our
products position us well in this challenging environment.
Net revenues increased for fiscal 2008 as compared to fiscal 2007 primarily due to a $644 million increase in
Content, subscriptions, and maintenance revenues coupled with a $31 million increase in Licenses revenues. These
increases were primarily related to increased revenues in our Storage and Server Management, Security and
Compliance, and Consumer segments as a result of higher beginning deferred revenue balances and increased sales.
35