Citrix 2009 Annual Report Download - page 94

Download and view the complete annual report

Please find page 94 of the 2009 Citrix annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 138

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138

CITRIX SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
order from the distributor, reseller or end-user (depending on the arrangement) and an executed product
license agreement from the end-user. For technical support, product training and consulting services,
the Company requires a purchase order and an executed agreement. For online services, the Company
requires the customer or the reseller to electronically accept the terms of an online services agreement
or execute a contract.
•Delivery has occurred and the Company has no remaining obligations. For product license and
hardware appliance sales, the Company’s standard delivery method is free-on-board shipping point.
Consequently, it considers delivery of packaged products and appliances to have occurred when the
products are shipped pursuant to an agreement and purchase order. The Company considers delivery of
licenses under electronic licensing agreements to have occurred when the related products are shipped
and the end-user has been electronically provided the software activation keys that allow the end-user
to take immediate possession of the product. For online services, delivery begins when the login id and
password have been provided to the customer. For product training and consulting services, the
Company fulfills its obligation when the services are performed. For license updates, technical support
and online services, the Company assumes that its obligation is satisfied ratably over the respective
terms of the agreements, which are typically 12 to 24 months.
•The fee is fixed or determinable. In the normal course of business, the Company does not provide
customers the right to a refund of any portion of their license fees or extended payment terms. The
Company sells license updates and services, which includes technical support, product training and
consulting services separately and it determines vendor specific objective evidence (“VSOE”) of fair
value by the price charged for each of these items when sold separately or based on applicable renewal
rates. For online services, the fee is considered fixed or determinable if it is not subject to refund or
adjustment.
•Collectability is probable. The Company determines collectability on a customer-by-customer basis
and generally does not require collateral. The Company typically sells product licenses and license
updates to distributors or resellers for whom there are histories of successful collection. New customers
are typically subject to a credit review process that evaluates their financial position and ultimately
their ability to pay. Customers are also subject to an ongoing credit review process. If the Company
determines from the outset of an arrangement that collectability is not probable, revenue recognition is
deferred until customer payment is received and the other parameters of revenue recognition described
above have been achieved. Management’s judgment is required in assessing the probability of
collection, which is generally based on evaluation of customer specific information, historical
experience and economic market conditions.
Net revenues include the following categories: Product Licenses, License Updates, Online Services and
Technical Services. Product License revenues primarily represent fees related to the licensing of the Company’s
software and hardware appliance products. These revenues are reflected net of sales allowances, cooperative
advertising agreements, reseller rewards and provisions for returns. License Update revenues consist of fees
related to the Subscription Advantage program that are recognized ratably over the term of the contract, which is
typically 12-24 months. Subscription Advantage is a renewable program that provides subscribers with
immediate access to software upgrades, enhancements and maintenance releases when and if they become
available during the term of the contract. The Company capitalizes certain third party commissions related to
Subscription Advantage renewals. The capitalized commissions are amortized to Sales, Marketing and Services
expense at the time the related deferred revenue is recognized as revenue. Online Services revenues consist
primarily of fees related to online service agreements, which are recognized ratably over the contract term. In
addition, Online Services revenues may also include set-up fees, which are recognized ratably over the contract
term or the expected customer life, whichever is longer. Technical Services revenues are comprised of fees from
F-14