Symantec 2016 Annual Report Download - page 152

appeals or litigation processes, if any. The second step requires us to estimate and measure the tax benefit as the
largest amount that is more than 50% likely to be realized upon ultimate settlement. It is inherently difficult and
subjective to estimate such amounts, as this requires us to determine the probability of various possible
outcomes. We reevaluate these uncertain tax positions on a quarterly basis. This evaluation is based on factors
including, but not limited to, changes in facts or circumstances, changes in tax law, effectively settled issues
under audit, and new audit activity. Such a change in recognition or measurement would result in the recognition
of a tax benefit or an additional charge to the tax provision in the period.
Stock-based compensation
Stock-based compensation expense is measured at the grant date based on the fair value of the award and is
generally recognized on a straight-line basis over the requisite service period, which is generally the vesting
period of the respective award. No compensation cost is ultimately recognized for awards for which employees
do not render the requisite service and are forfeited. We estimate forfeitures based on historical experience. Our
stock-based awards principally consist of restricted stock units (“RSUs”). The fair value of each RSU is equal to
the market value of Symantec’s common stock on the date of grant. The fair values of RSUs are not discounted
by the dividend yield because the Company’s RSUs include dividend-equivalent rights (“DERs”). As of April 1,
2016 and April 3, 2015, our total accrued DERs were $75 million and $20 million, respectively, which are
included in other current liabilities and other long-term obligations on our Consolidated Balance Sheets.
Concentrations of credit risk
A significant portion of our revenue and net income is derived from international sales and independent
agents and distributors. Fluctuations of the U.S. dollar against foreign currencies, changes in local regulatory or
economic conditions, piracy, or nonperformance by independent agents or distributors could adversely affect
operating results.
Financial instruments that potentially subject us to concentrations of credit risk consist principally of cash
and cash equivalents, short-term investments, and trade accounts receivable. Our investment policy limits the
amount of credit risk exposure to any one issuer and to any one country. We are exposed to credit risks in the
event of default by the issuers to the extent of the amount recorded in our Consolidated Balance Sheets. The
credit risk in our trade accounts receivable is substantially mitigated by our credit evaluation process, reasonably
short collection terms, and the geographical dispersion of sales transactions. As of April 1, 2016, we had one
distributor that accounted for 10% of our total accounts receivable. We maintain reserves for potential credit
losses and such losses have been within management’s expectations.
Advertising and other promotional costs
Advertising and other promotional costs are charged to operations as incurred and included in operating
expenses. These costs totaled $211 million, $326 million, and $436 million for fiscal 2016, 2015, and 2014,
respectively.
Contingencies
We evaluate contingent liabilities including threatened or pending litigation in accordance with the
authoritative guidance on contingencies. We assess the likelihood of any adverse judgments or outcomes from
potential claims or proceedings, as well as potential ranges of probable losses, when the outcomes of the claims
or proceedings are probable and reasonably estimable. A determination of the amount of an accrual required, if
any, for these contingencies is made after the analysis of each separate matter. Because of uncertainties related to
these matters, we base our estimates on the information available at the time of our assessment. As additional
information becomes available, we reassess the potential liability related to our pending claims and litigation and
may revise our estimates. Any revisions in the estimates of potential liabilities could have a material impact on
our operating results and financial position.
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