Citrix 2012 Annual Report Download - page 40

36
Critical Accounting Policies and Estimates
Our discussion and analysis of financial condition and results of operations are based upon our consolidated financial
statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The
preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets,
liabilities, revenues and expenses, and related disclosure of contingent liabilities. We base these estimates on our historical
experience and on various other assumptions that we believe to be reasonable under the circumstances, and these estimates
form the basis for our judgments concerning the carrying values of assets and liabilities that are not readily apparent from other
sources. We periodically evaluate these estimates and judgments based on available information and experience. Actual results
could differ from our estimates under different assumptions and conditions. If actual results significantly differ from our
estimates, our financial condition and results of operations could be materially impacted.
We believe that the accounting policies described below are critical to understanding our business, results of operations
and financial condition because they involve more significant judgments and estimates used in the preparation of our
consolidated financial statements. An accounting policy is deemed to be critical if it requires an accounting estimate to be made
based on assumptions about matters that are highly uncertain at the time the estimate is made, and if different estimates that
could have been used, or changes in the accounting estimates that are reasonably likely to occur periodically, could materially
impact our consolidated financial statements. We have discussed the development, selection and application of our critical
accounting policies with the Audit Committee of our Board of Directors and our independent auditors, and our Audit
Committee has reviewed our disclosure relating to our critical accounting policies and estimates in this “Management’s
Discussion and Analysis of Financial Condition and Results of Operations.”
Note 2 to our consolidated financial statements included in this Annual Report on Form 10-K for the year ended
December 31, 2012 describes the significant accounting policies and methods used in the preparation of our Consolidated
Financial Statements.
Revenue Recognition
We recognize revenue when it is earned and when all of the following criteria are met: persuasive evidence of the
arrangement exists; delivery has occurred or the service has been provided and we have no remaining obligations; the fee is
fixed or determinable; and collectability is probable. We define these four criteria as follows:
• Persuasive evidence of the arrangement exists. We primarily sell our software products via electronic or paper
licenses and typically require a purchase order from the distributor, reseller or end-user (depending on the
arrangement) who have previously negotiated a master distribution or resale agreement and an executed product
license agreement from the end-user. For appliance sales, our customary practice is to require a purchase order from
distributors and resellers who have previously negotiated a master packaged product distribution or resale agreement.
We typically recognize revenue upon shipment for our appliance sales. For maintenance, technical support, product
training and consulting services, we require a purchase order and an executed agreement. For SaaS, we generally
require the customer or the reseller to electronically accept the terms of an online services agreement or execute a
contract.
• Delivery has occurred and we have no remaining obligations. We consider 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
hardware appliance sales, our standard delivery method is free-on-board shipping point. Consequently, we consider
delivery of appliances to have occurred when the products are shipped pursuant to an agreement and purchase order.
For SaaS, delivery occurs upon providing the users with their login id and password. For product training and
consulting services, we fulfill our obligation when the services are performed. For license updates, maintenance and
technical support, we assume that our obligation is satisfied ratably over the respective terms of the agreements,
which are typically 12 to 24 months. For SaaS, we assume that our obligation is satisfied ratably over the respective
terms of the agreements, which are typically 12 months.
• The fee is fixed or determinable. In the normal course of business, we do not provide customers with the right to a
refund of any portion of their license fees or extended payment terms. The fees are considered fixed or determinable
upon establishment of an arrangement that contains the final terms of the sale including description, quantity and
price of each product or service purchased. For SaaS, the fee is considered fixed or determinable if it is not subject to
refund or adjustment.
• Collectability is probable. We determine collectability on a customer-by-customer basis and generally do not require
collateral. We typically sell 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.