Symantec 2012 Annual Report Download - page 113

judgment to allocate the assets and liabilities, and this allocation affects the carrying value of the respective
reporting units. Similarly, we use judgment to allocate goodwill to the reporting units based on relative fair
values. The use of relative fair values has been necessary for certain reporting units due to changes in our
operating structure in prior years. To determine a reporting unit’s 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. We evaluate the reasonableness of this approach by comparing it with the market approach, which
involves a review of the carrying value of our assets relative to our market capitalization and to the valuation of
publicly traded companies operating in the same or similar lines of business.
Applying the income approach requires that we make a number of important estimates and assumptions. We
estimate the future cash flows of each reporting unit based on historical and forecasted revenue and operating
costs. This, in turn, involves further estimates, such as estimates of future revenue and expense growth rates and
foreign exchange rates. In addition, we apply a discount rate to the estimated future cash flows for the purpose of
the valuation. This discount rate is based on the estimated weighted-average cost of capital for each reporting
unit and may change from year to year. Changes in these key estimates and assumptions, or in other assumptions
used in this process, could materially affect our impairment analysis for a given year.
As of March 30, 2012, our goodwill balance was $5.8 billion. Based on the impairment analysis performed
on December 31, 2011, we determined that the fair value of each of our reporting units exceeded the carrying
value of the unit by more than 10% of the carrying value. While discount rates are only one of several important
estimates used in the analysis, we determined that an increase of one percentage point in the discount rate used
for each respective reporting unit would not have resulted in an impairment indicator for any unit at the time of
this analysis. In addition to the discount rate, the impairment test includes the consideration of a number of
estimates, including growth rates, operating margins and cost forecasts, foreign exchange rates and the allocation
of certain tangible assets to the reporting units. Based on the results of our impairment test, we do not believe that
an impairment indicator exists as of our annual impairment test date.
A number of factors, many of which we have no ability to control, could affect our financial condition,
operating results and business prospects and could cause actual results to differ from the estimates and
assumptions we employed. These factors include:
• a prolonged global economic crisis;
• a significant decrease in the demand for our products;
• the inability to develop new and enhanced products and services in a timely manner;
• a significant adverse change in legal factors or in the business climate;
• an adverse action or assessment by a regulator;
• successful efforts by our competitors to gain market share in our markets;
• a loss of key personnel;
• our determination to dispose of one or more of our reporting units;
• the testing for recoverability of a significant asset group within a reporting unit; and
• recognition of a goodwill impairment loss.
Intangible asset impairment. We assess the impairment of identifiable finite-lived intangible assets
whenever events or changes in circumstances indicate that an asset group’s carrying amount may not be
recoverable. Recoverability of certain finite-lived intangible assets, particularly customer relationships and finite-
lived tradenames, would be measured by the comparison of the carrying amount of the asset group to which the
assets are assigned to the sum of the undiscounted estimated future cash flows the asset group is expected to
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