Symantec 2014 Annual Report Download - page 114

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. A qualitative assessment is first made to determine whether it is necessary to perform
quantitative testing. This initial assessment includes, among others, consideration of: (i) past, current and
projected future earnings and equity; (ii) recent trends and market conditions; and (iii) valuation metrics
involving similar companies that are publicly-traded and acquisitions of similar companies, if available. If this
initial qualitative assessment indicates that it is more likely than not that impairment exists, a second step is
taken, involving a comparison between the estimated fair values of our reporting units with their respective
carrying amounts including goodwill. The methods for estimating reporting unit values include asset and liability
fair values and other valuation techniques, such as discounted cash flows and multiples of earnings or revenues.
If the carrying value exceeds estimated fair value, there is an indication of potential impairment, and a third step
is performed to measure the amount of impairment. The third step involves calculating an implied fair value of
goodwill by measuring the excess of the estimated fair value of the reporting units over the aggregate estimated
fair values of the individual assets less liabilities. If the carrying value of goodwill exceeds the implied fair value
of goodwill, an impairment charge is recorded for the excess.
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