Symantec 2016 Annual Report Download - page 148

the product or service were sold on a stand-alone basis. The determination of ESP is made through consultation
with and formal approval by our management, taking into consideration the go-to-market strategy, pricing
factors, and historical transactions.
Indirect channel sales
We sell consumer packaged software products through a multi-tiered distribution channel. For consumer
products that include content updates, we recognize revenue ratably over the term of the subscription upon sell-
through to end-users, as the subscription period commences on the date of sale to the end-user. For most other
consumer products, we recognize packaged product revenue on distributor and reseller channel inventory that is
not in excess of specified inventory levels in these channels. We offer the right of return of our products under
various policies and programs with our distributors, resellers, and end-user customers. We estimate and record
reserves for product returns as an offset to revenue or deferred revenue. We fully reserve for obsolete products in
the distribution channel as an offset to deferred revenue for products with content updates and to revenue for all
other products.
For security products, we generally recognize revenue from the licensing of software products through our
indirect sales channel upon sell-through or with evidence of an end-user. For licensing of our software to original
equipment manufacturers (“OEMs”), royalty revenue is recognized when the OEM reports the sale of the
software products to an end-user, generally on a quarterly basis. In addition to license royalties, some OEMs pay
an annual flat fee and/or support royalties for the right to sell maintenance and technical support to the end-user.
We recognize revenue from OEM support royalties and fees ratably over the term of the support agreement.
We offer channel and end-user rebates for our products. Our estimated reserves for channel 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 program, 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 estimate and record reserves for channel and end-user rebates as an
offset to revenue or deferred revenue. As of April 1, 2016 and April 3, 2015, we had reserves for rebates of $32
million and $30 million, respectively. For consumer products that include content updates, rebates are recorded
as a ratable offset to revenue or deferred revenue over the term of the subscription.
Financial instruments
For assets and liabilities measured at fair value, such amounts are based on an expected exit price
representing the amount that would be received on the sale of an asset or paid to transfer a liability, as the case
may be, in an orderly transaction between market participants. As such, fair value may be based on assumptions
that market participants would use in pricing an asset or liability. The authoritative guidance on fair value
measurements establishes a consistent framework for measuring fair value on either a recurring or nonrecurring
basis whereby inputs used in valuation techniques are assigned a hierarchical level.
The following methods were used to estimate the fair value of each class of financial instruments for which
it is practicable to estimate that value:
Cash equivalents. We consider all highly liquid investments with an original maturity of three months or
less at the time of purchase to be cash equivalents. Cash equivalents are carried at amounts that approximate fair
value due to the short period of time to maturity.
Short-term investments. Short-term investments consist of investment and marketable equity securities that
are classified as available-for-sale and recognized at fair value using Level 1 and Level 2 inputs, which are
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