Symantec 2014 Annual Report Download - page 116

assets are assigned to the sum of the undiscounted estimated future cash flows the asset group is expected to
generate. If an asset is considered to be impaired, the amount of such impairment would be measured as the
difference between the carrying amount of the asset and its fair value. Recoverability and impairment of other
finite-lived intangible assets, particularly developed technology and patents, would be measured by the
comparison of the carrying amount of the asset to the sum of undiscounted estimated future product revenues
offset by estimated future costs to dispose of the product to which the asset relates. For indefinite-lived
intangible assets, we review impairment on an annual basis consistent with the timing of the annual evaluation
for goodwill. These assets generally include trade names and trademarks. Similar to goodwill impairment
testing, a qualitative assessment is first made to determine whether it is necessary to perform quantitative
testing. This initial assessment includes consideration of, among other things: (i) past, current and projected
future revenues; (ii) recent trends and market conditions, including discount rates; and (iv) valuation metrics,
such as royalty rates, involving similar companies that are publicly-traded, if available. If this initial
qualitative assessment indicates that it is more likely than not that impairment exists, a second step is taken.
This step involves a comparison between the fair values of the assets and their respective carrying amounts.
Any excess of the carrying amount over the fair value would be recognized as an impairment charge. Our cash
flow assumptions are based on historical and forecasted future revenue, operating costs, and other relevant
factors. Assumptions and estimates about the remaining useful lives of our intangible assets are subjective and
are affected by changes to our business strategies. If management’s estimates of future operating results
change, or if there are changes to other assumptions, the estimate of the fair value of our identifiable
intangible assets could change significantly. Such change could result in impairment charges in future periods,
which could have a significant impact on our operating results and financial condition.
Long-lived assets. We assess long-lived assets for impairment whenever events or changes in
circumstances indicate that the carrying value of the long-lived assets may not be recoverable. Based on the
existence of one or more indicators of impairment, we assess recoverability of long-lived assets based on a
projected undiscounted cash flow method using assumptions determined by management to be commensurate
with the risk inherent in our current business model. If an asset is not recoverable, impairment is measured as
the difference between the carrying amount and its fair value. Our estimates of cash flows require significant
judgment based on our historical and anticipated results and are subject to many factors which could change
and cause a material impact to our operating results or financial condition. We record impairment charges on
long-lived assets held for sale when we determine that the carrying value of the long-lived assets may not be
recoverable. In determining fair value, we obtain and consider market value appraisal information from third
parties.
Stock-based compensation
We account for stock-based compensation in accordance with the authoritative guidance on stock
compensation. Under the fair value recognition provisions of this guidance, stock-based compensation is
measured at the grant date based on the fair value of the award and is generally recognized as expense ratably
over the requisite service period, which is generally the vesting period of the respective award.
We issue performance-based restricted stock units (“PRUs”) and performance-contingent stock units
(“PCSUs”) representing hypothetical shares of our common stock. Each PRU and PCSU grant reflects a target
number of shares that may be issued to the award recipient. The actual number of PRUs the recipient receives is
determined at the end of a three-year performance period as follows: (1) our achievement of an annual target
earnings per share for the first fiscal year of grant and (2) our two and three year cumulative relative total
shareholder return ranked against that of other companies that are included in the Standard & Poor’s 500 Index.
The PCSUs vest based upon the performance of Symantec’s common stock over a three-year period, and are also
subject to an underlying continued service vesting condition. We estimate the fair value of PRUs using the Monte
Carlo simulation option pricing model (“Monte Carlo model”), as the total shareholder return modifier contains a
market condition. We estimate the fair value and derived service period of PCSUs using the Monte Carlo model,
as this statistical model can simulate a range of possible future stock prices for Symantec. Because our PRUs
include dividend-equivalent rights, the fair values of PRUs are not discounted by the dividend yield.
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