Symantec 2012 Annual Report Download - page 112

Reserves for rebates. We estimate and record reserves for channel and end-user rebates as an offset to
revenue. For consumer products that include content updates, rebates are recorded as a ratable offset to revenue
over the term of the subscription. Our estimated reserves for channel volume incentive rebates are based on
distributors’ and resellers’ actual performance against the terms and conditions of volume incentive rebate
programs, which are typically entered into quarterly. Our reserves for end-user rebates are estimated based on the
terms and conditions of the promotional programs, actual sales during the promotion, the amount of actual
redemptions received, historical redemption trends by product and by type of promotional program, and the value
of the rebate. We also consider current market conditions and economic trends when estimating our reserves for
rebates. If actual redemptions 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
Business combination valuations. 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 information obtained from management of the acquired companies and historical
experience. These estimates can include, but are not limited to:
• cash flows that an asset is expected to generate in the future;
• expected costs to develop the in-process research and development into commercially viable products and
estimated cash flows from the projects when completed;
• the acquired company’s brand and competitive position, as well as assumptions about the period of time
the acquired brand will continue to be used in the combined company’s product portfolio;
• cost savings expected to be derived from acquiring an asset; and
• discount rates.
These estimates are inherently uncertain and unpredictable, and if different estimates were used the
purchase price for the acquisition could be allocated to the acquired assets and liabilities differently from the
allocation that we have made. In addition, unanticipated events and circumstances may occur which may affect
the accuracy or validity of such estimates, and if such events occur we may be required to record a charge against
the value ascribed to an acquired asset or an increase in the amounts recorded for assumed liabilities.
Goodwill impairment. We review goodwill for impairment on an annual basis on the first day of the
fourth quarter of each fiscal year, and on an interim basis whenever events or changes in circumstances indicate
that the carrying value may not be recoverable, at the reporting unit level. Our reporting units are the same as our
operating segments. Before performing the goodwill impairment test, we first assess the value of long-lived
assets in each reporting unit, including tangible and intangible assets. We then perform a two-step impairment
test on goodwill. In the first step, we compare the estimated fair value of equity of each reporting unit to its
allocated carrying value (book value) of equity. If the carrying value of the reporting unit exceeds the fair value
of the equity associated with that unit, there is an indicator of impairment and we must perform the second step
of the impairment test. This second step involves determining the implied fair value of that reporting unit’s
goodwill in a manner similar to the purchase price allocation for an acquired business, using the reporting unit’s
calculated fair value as an assumed purchase price. 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.
The process of estimating the fair value and carrying value of our reporting units’ equity requires significant
judgment at many points during the analysis. Many assets and liabilities, such as accounts receivable and
property and equipment, are not specifically allocated to an individual reporting unit, and therefore, we apply
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