Symantec 2010 Annual Report Download - page 121

On March 29, 2006, we received a Notice of Deficiency from the IRS claiming that we owe $867 million of
additional taxes, excluding interest and penalties, for the 2000 and 2001 tax years based on an audit of Veritas. On
June 26, 2006, we filed a petition with the U.S. Tax Court protesting the IRS claim for such additional taxes. During
July 2008, we completed the trial phase of the Tax Court case, which dealt with the remaining issue covered in the
assessment. At trial, the IRS changed its position with respect to this remaining issue, which decreased the
remaining amount at issue from $832 million to $545 million, excluding interest. We filed our post-trial briefs in
October 2008 and rebuttal briefs in November 2008 with the U.S. Tax Court.
On December 10, 2009, the U.S. Tax Court issued its opinion, finding that our transfer pricing methodology,
with appropriate adjustments, was the best method for assessing the value of the transaction at issue between Veritas
and its offshore subsidiary. The Tax Court judge provided guidance as to how adjustments would be made to correct
the application of the method used by Veritas. We remeasured and decreased our liability for unrecognized tax
benefits accordingly, resulting in a $78.5 million tax benefit in the third quarter of fiscal 2010. Final computations as
directed by the Ruling are not complete and, accordingly, we may make further adjustments to our tax liability in the
future. The Tax Court ruling is subject to appeal. We have $110 million on deposit with the IRS pertaining to this
matter. We do not anticipate making any further federal tax payments for these years.
On December 2, 2009, we received a Revenue Agent’s Report from the IRS for the Veritas 2002 through 2005
tax years assessing additional taxes due. We agree with $30 million of the tax assessment, excluding interest, but
will contest the other $80 million of tax assessed and all penalties. The unagreed issues concern transfer pricing
matters comparable to the one that was resolved in our favor in the Veritas v. Commissioner Tax Court decision. On
January 15, 2010 we filed a protest with the IRS in connection with the $80 million of tax assessed.
We continue to monitor the progress of ongoing tax controversies and the impact, if any, of the expected tolling
of the statute of limitations in various taxing jurisdictions.
Loss from joint venture
Fiscal
2010 $ %
Fiscal
2009 $ %
Fiscal
2008
2010 vs. 2009 2009 vs. 2008
($ in millions)
Loss from joint venture .................. $39 $(14) (26)% $53 $53 100% $—
Percentage of total net revenue ............ 1% 1% 0%
On February 5, 2008, Symantec formed a joint venture with a subsidiary of Huawei Technologies Co., Limited
(“Huawei”). The joint venture is domiciled in Hong Kong with principal operations in Chengdu, China. The joint
venture develops, manufactures, markets and supports security and storage appliances for global telecommuni-
cations carriers and enterprise customers.
As described in Note 6 of the Notes to Consolidated Financial Statements in this annual report, the joint
venture adopted new authoritative guidance on revenue arrangements with multiple deliverables during its period
ended December 31, 2009, which was applied to the beginning of its fiscal year. As a result of the joint venture’s
adoption of the guidance, our net income was $12 million higher for fiscal 2010 than it would have been under the
pre-existing accounting guidance. We account for our investment in the joint venture under the equity method of
accounting. Under this method, we record our proportionate share of the joint venture’s net income or loss based on
the quarterly financial statements of the joint venture. We record our proportionate share of net income or loss one
quarter in arrears.
For fiscal 2010, we recorded a loss of approximately $39 million related to our share of the joint venture’s net
loss incurred for the period from January 1, 2009 to December 31, 2009. For fiscal 2009, we recorded a loss of
approximately $53 million related to our share of the joint venture’s net loss incurred for the period from February 5,
2008 (its date of inception) to December 31, 2008.
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