Citrix 2005 Annual Report Download - page 47

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Page฀45
Inventory
Inventories฀are฀stated฀at฀the฀lower฀of฀cost฀or฀market฀consistently฀on฀a฀first-in,฀first-out฀basis฀and฀primarily฀consist฀of฀finished฀goods.฀
When฀necessary,฀a฀provision฀has฀been฀made฀to฀reduce฀obsolete฀or฀excess฀inventories฀to฀market.
Property฀and฀Equipment
Property฀and฀equipment฀is฀stated฀at฀cost.฀Depreciation฀is฀computed฀using฀the฀straight-line฀method฀over฀the฀estimated฀useful฀lives฀
of฀the฀assets,฀which฀is฀generally฀three฀years฀for฀computer฀equipment,฀software,฀office฀equipment฀and฀furniture,฀the฀lesser฀of฀the฀
lease฀term฀or฀five฀years฀for฀leasehold฀improvements,฀which฀is฀the฀estimated฀useful฀life,฀seven฀years฀for฀the฀Company’s฀enterprise฀
resource฀planning฀system฀and฀40฀years฀for฀buildings.฀Depreciation฀expense฀was฀$22.0฀million,฀$21.2฀million฀and฀$23.0฀million฀for฀
2005,฀2004฀and฀2003,฀respectively.
During฀2005,฀the฀Company฀retired฀$8.0฀million฀in฀property฀and฀equipment฀that฀were฀no฀longer฀in฀use.฀At฀the฀time฀of฀retirement,฀the฀
remaining฀net฀book฀value฀of฀these฀assets฀was฀immaterial฀and฀no฀asset฀retirement฀obligations฀were฀associated฀with฀them.฀In฀2004฀
retirements฀were฀not฀material.
Property฀and฀equipment฀consist฀of฀the฀following:
December฀31,
(In฀thousands) 2005 2004
Buildings $฀ 17,781 $฀ 17,781
Computer฀equipment 66,594 57,628
Software 53,479 47,799
Equipment฀and฀furniture 19,401 18,143
Leasehold฀improvements 39,075 35,759
Land 9,062 9,062
205,392 186,172
Less฀accumulated฀depreciation฀and฀amortization (131,665) (116,891)
$฀ 73,727 $฀ 69,281
Long-Lived฀Assets
The฀Company฀reviews฀for฀impairment฀of฀long-lived฀assets฀and฀certain฀identifiable฀intangible฀assets฀to฀be฀held฀and฀used฀whenever฀
events฀or฀changes฀in฀circumstances฀indicate฀that฀the฀carrying฀amount฀of฀such฀assets฀may฀not฀be฀fully฀recoverable.฀Determination฀
of฀recoverability฀is฀based฀on฀an฀estimate฀of฀undiscounted฀future฀cash฀flows฀resulting฀from฀the฀use฀of฀the฀asset฀and฀its฀eventual฀
disposition.฀Measurement฀of฀an฀impairment฀loss฀is฀based฀on฀the฀fair฀value฀of฀the฀asset฀compared฀to฀its฀carrying฀value.฀Long-lived฀
assets฀and฀certain฀identifiable฀intangible฀assets฀to฀be฀disposed฀of฀are฀reported฀at฀the฀lower฀of฀carrying฀amount฀or฀fair฀value฀less฀
costs฀to฀sell.฀During฀2005,฀2004฀and฀2003,฀the฀Company฀did฀not฀recognize฀any฀impairment฀charges฀associated฀with฀its฀long-lived฀
or฀intangible฀assets.
Software฀Developed฀or฀Obtained฀for฀Internal฀Use
The฀Company฀accounts฀for฀internal฀use฀software฀pursuant฀to฀the฀American฀Institute฀of฀Certified฀Public฀Accountants฀Statement฀of฀
Position฀(“SOP”)฀No.฀98-1,฀Accounting฀for฀the฀Costs฀of฀Computer฀Software฀Developed฀or฀Obtained฀for฀Internal฀Use.฀Pursuant฀to฀
SOP฀No.฀98-1,฀the฀Company฀capitalizes฀external฀direct฀costs฀of฀materials฀and฀services฀used฀in฀the฀project฀and฀internal฀costs฀such฀
as฀payroll฀and฀benefits฀of฀those฀employees฀directly฀associated฀with฀the฀development฀of฀the฀software.฀The฀amount฀of฀costs฀capitalized฀
in฀2005฀and฀2004฀relating฀to฀internal฀use฀software฀were฀$7.2฀million฀and฀$6.6฀million,฀respectively,฀consisting฀of฀purchased฀software฀
and฀services฀provided฀by฀external฀vendors.฀These฀costs฀are฀being฀amortized฀over฀the฀estimated฀useful฀life฀of฀the฀software,฀which฀
is฀generally฀three฀to฀seven฀years,฀and฀are฀included฀in฀property฀and฀equipment฀in฀the฀accompanying฀consolidated฀balance฀sheets.
Goodwill
The฀Company฀accounts฀for฀goodwill฀in฀accordance฀with฀SFAS฀No.฀142,฀Goodwill฀and฀Other฀Intangible฀Assets.฀SFAS฀No.฀142,฀requires฀
that฀goodwill฀and฀certain฀intangible฀assets฀are฀not฀amortized,฀but฀are฀subject฀to฀an฀annual฀impairment฀test.฀At฀December฀31,฀2005฀
and฀2004,฀the฀Company฀had฀$592.0฀million฀and฀$361.5฀million฀of฀goodwill,฀respectively.฀There฀was฀no฀impairment฀of฀goodwill฀as฀a฀
result฀of฀the฀annual฀impairment฀tests฀completed฀during฀the฀fourth฀quarters฀of฀2005฀and฀2004.฀Excluding฀goodwill,฀the฀Company฀