Symantec 2010 Annual Report Download - page 144

Business Combinations
We use the acquisition method of accounting under the authoritative guidance on business combinations. Each
acquired company’s operating results are included in our consolidated financial statements starting on the date of
acquisition. The purchase price is equivalent to the fair value of consideration transferred. Tangible and identifiable
intangible assets acquired and liabilities assumed as of the date of acquisition are recorded at the acquisition date
fair value. Goodwill is recognized for the excess of purchase price over the net fair value of assets acquired and
liabilities assumed.
Amounts allocated to assets and liabilities are based upon fair values. Such valuations require management to
make significant estimates and assumptions, especially with respect to the identifiable intangible assets. Man-
agement makes estimates of fair value based upon assumptions believed to be reasonable and that of a market
participant. These estimates are based on historical experience and information obtained from the management of
the acquired companies and are inherently uncertain. The separately identifiable intangible assets generally include
acquired product rights, developed technology, customer lists and tradenames. We did not acquire in-process
research and development (“IPR&D”) in the fiscal years 2010, 2009 and 2008. We estimate the fair value of
deferred revenue related to product support assumed in connection with acquisitions. The estimated fair value of
deferred revenue is determined by estimating the costs related to fulfilling the obligations plus a normal profit
margin. The estimated costs to fulfill the support contracts are based on the historical direct costs related to
providing the support.
For any given acquisition, we may identify certain pre-acquisition contingencies. We estimate the fair value of
such contingencies, which are included under the acquisition method as part of the assets acquired or liabilities
assumed, as appropriate. Differences from these estimates are recorded in the period in which they are identified.
Goodwill and Intangible Assets
Goodwill. Our methodology for allocating the purchase price relating to acquisitions is determined through
established valuation techniques. Goodwill is measured as the excess of the cost of the acquisition over the sum of
the amounts assigned to tangible and identifiable intangible assets acquired less liabilities assumed. We review
goodwill for impairment on an annual basis during the fourth quarter of the fiscal year and whenever events or
changes in circumstances indicate the carrying value of goodwill may be impaired. In testing for a potential
impairment of goodwill, we determine the carrying value (book value) of the assets and liabilities for each reporting
unit, which requires the allocation of goodwill to each reporting unit. We then estimate the fair value of each
reporting unit, which are the same as our operating segments. The first step in evaluating goodwill for impairment is
to determine if the estimated fair value of equity is greater than the carrying value of equity of each reporting unit. If
step one indicates that impairment potentially exists, the second step is performed to measure the amount of
impairment, if any. Goodwill impairment exists when the estimated fair value of goodwill is less than its carrying
value.
To determine the reporting units’ fair values in the current year analysis, we use the income approach which is
based on the estimated discounted future cash flows of that reporting unit. The estimated fair value of each reporting
unit under the income approach is corroborated with the market approach which measures the value of an asset
through an analysis of recent sales or offerings of comparable property. We also consider our market capitalization
on the date of the analysis. The methodology applied in the current year analysis was consistent with the
methodology applied in the prior year analysis, but was based on updated assumptions, as appropriate.
Our cash flow assumptions are based on historical and forecasted revenue, operating costs and other relevant
factors. To determine the reporting units’ carrying values, we allocated assets and liabilities based on either specific
identification or by using judgment for the remaining assets and liabilities that are not specific to a reporting unit.
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
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SYMANTEC CORPORATION
Notes to Consolidated Financial Statements — (Continued)