Citrix 2009 Annual Report Download - page 98

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CITRIX SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In the ordinary course of global business, there are transactions for which the ultimate tax outcome is
uncertain; thus, judgment is required in determining the worldwide provision for income taxes. The Company
provides for income taxes on transactions based on its estimate of the probable liability. The Company adjusts its
provision as appropriate for changes that impact its underlying judgments. Changes that impact provision
estimates include such items as jurisdictional interpretations on tax filing positions based on the results of tax
audits and general tax authority rulings. Due to the evolving nature of tax rules combined with the large number
of jurisdictions in which the Company operates, it is possible that its estimates of its tax liability and the
realizability of its deferred tax assets could change in the future, which may result in additional tax liabilities and
adversely affect the Company’s results of operations, financial condition and cash flows.
The Company is required to estimate its income taxes in each of the jurisdictions in which it operates as part
of the process of preparing its consolidated financial statements. The FASB’s authoritative guidance governing
accounting for income taxes requires a valuation allowance to reduce the deferred tax assets reported if, based on
the weight of the evidence, it is more likely than not that some portion or all of the deferred tax assets will not be
realized. The Company reviews deferred tax assets periodically for recoverability and makes estimates and
judgments regarding the expected geographic sources of taxable income and gains from investments, as well as
tax planning strategies in assessing the need for a valuation allowance.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the
United States requires management to make estimates and assumptions that affect the amounts reported in the
consolidated financial statements and accompanying notes. Significant estimates made by management include
the provision for doubtful accounts receivable, the provision to reduce obsolete or excess inventory to market, the
provision for estimated returns, as well as sales allowances, the assumptions used in the valuation of stock-based
awards, the assumptions used in the discounted cash flows to mark certain of its investments to market, the
valuation of the Company’s goodwill, net realizable value of product related intangible assets, the provision for
vacant facility costs, the provision for income taxes and the amortization and depreciation periods for intangible
and long-lived assets. While the Company believes that such estimates are fair when considered in conjunction
with the consolidated financial position and results of operations taken as a whole, the actual amounts of such
items, when known, will vary from these estimates.
Accounting for Stock-Based Compensation
The Company has various stock-based compensation plans for its employees and outside directors and
accounts for stock-based compensation arrangements in accordance with the authoritative guidance, which
requires the Company to measure and record compensation expense in its consolidated financial statements using
a fair value method. See Note 7 for further information regarding the Company’s stock-based compensation
plans.
Earnings per Share
Basic earnings per share is calculated by dividing income available to stockholders by the weighted-average
number of common shares outstanding during each period. Diluted earnings per share is computed using the
weighted average number of common and dilutive common share equivalents outstanding during the period.
Dilutive common share equivalents consist of shares issuable upon the exercise of stock awards (calculated using
the treasury stock method) during the period they were outstanding. Certain shares under the Company’s stock-
based compensation programs were excluded from the computation of diluted earnings per share due to their
F-18