Symantec 2016 Annual Report Download - page 147

Revenue recognition
We market and distribute our software products both as stand-alone products and as integrated product
suites. We recognize revenue when 1) persuasive evidence of an arrangement exists, 2) delivery has occurred or
services have been rendered, 3) fees are fixed or determinable and 4) collectability is probable. If we determine
that any one of the four criteria is not met, we will defer recognition of revenue until all the criteria are met.
We derive revenue primarily from sales of content, subscriptions, and maintenance and licenses. We present
revenue net of sales taxes and any similar assessments.
Content, subscription, and maintenance revenue includes arrangements for software maintenance and
technical support for our products, content and subscription services primarily related to our security products,
revenue from arrangements where vendor-specific objective evidence (“VSOE”) of the fair value of undelivered
elements does not exist, arrangements for managed security services, and software as a service (“SaaS”)
offerings. These arrangements are generally offered to our customers over a specified period of time, and we
recognize the related revenue ratably over the maintenance, subscription, or service period. We enter into
perpetual software license agreements through direct sales to customers and indirect sales with distributors and
resellers. The license agreements generally include product maintenance agreements, for which the related
revenue is included with content, subscriptions, and maintenance and is deferred and recognized ratably over the
period of the agreements.
Content, subscription, and maintenance revenue also includes professional services revenue, consisting
primarily of the fees we earn related to consulting and educational services. We generally recognize revenue
from professional services as the services are performed or upon written acceptance from customers, if
applicable, assuming all other conditions for revenue recognition noted above have been met.
License revenue is derived primarily from the licensing of our various products and technology. We
generally recognize license revenue upon delivery of the product, assuming all other conditions for revenue
recognition noted above have been met. License revenue also includes appliance product revenue. We generally
recognize appliance product revenue as each product is delivered, assuming all other conditions for revenue
recognition noted above have been met.
For software arrangements that include multiple elements, including perpetual software licenses,
maintenance, services, and packaged products with content updates and subscriptions, we allocate and defer
revenue for the undelivered items based on VSOE of the fair value of the undelivered elements, and recognize
the difference between the total arrangement fee and the amount deferred for the undelivered items as license
revenue. VSOE of each element is based on historical evidence of our stand-alone sales of these elements to third
parties or from the stated renewal rate for the undelivered elements. When VSOE does not exist for undelivered
items, the entire arrangement fee is recognized ratably over the performance period. Our deferred revenue
consists primarily of the unamortized balance of enterprise product maintenance, consumer product content
updates, managed security services, subscriptions, and arrangements where VSOE does not exist for an
undelivered element.
For arrangements that include both software and non-software elements, we allocate revenue to the software
deliverables as a group and non-software deliverables based on their relative selling prices. In such
circumstances, the accounting principles establish a hierarchy to determine the selling price used for allocating
revenue to the deliverables as follows: (i) VSOE, (ii) third-party evidence of selling price (“TPE”) and (iii) the
best estimate of the selling price (“ESP”). Our appliance products, SaaS and certain other services are considered
to be non-software elements in our arrangements.
When we are unable to establish a selling price using VSOE or TPE, we use ESP in the allocation of
arrangement consideration. The objective of ESP is to determine the price at which we would transact a sale if
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