Symantec 2014 Annual Report Download - page 147

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 our Consolidated Statements of
Income 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 for each reporting unit 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. 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 analysis is performed, involving a comparison
between the estimated fair values of our reporting units with their respective carrying amounts including
goodwill. If the carrying value exceeds estimated fair value, there is an indication of potential impairment, and a
third analysis is performed to measure the amount of impairment. The third analysis involves calculating an
implied fair value of goodwill by measuring the excess of the estimated fair value of the reporting unit 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.
To determine the reporting units’ fair values in the second step, we would 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
a business through an analysis of recent sales or offerings of a comparable entity. We also consider our market
capitalization on the date of the analysis to ensure the reasonableness of the sum of our reporting units’ estimated
fair value.
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.
Intangible assets. In connection with our acquisitions, we generally recognize assets for customer
relationships, developed technology (which consists of acquired product rights, technologies, databases, and
contracts), in-process research and development, trademarks, and trade names. Indefinite-lived intangible assets
are not subject to amortization. Finite-lived intangible assets are carried at cost less accumulated amortization.
Such amortization is provided on a straight-line basis over the estimated useful lives of the respective assets,
generally from one to eleven years. Amortization for developed technology is recognized in cost of revenue.
Amortization for customer relationships and certain trade names is recognized in operating expenses.
We assess the impairment of identifiable 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 trade names, 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 generate. If an asset is considered to be
impaired, such amount would be measured as the difference between the carrying amount of the asset and its fair
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