Citrix 2012 Annual Report Download - page 82

F-16
Income Taxes
The Company and one or more of its subsidiaries is subject to United States federal income taxes, as well as income taxes
of multiple state and foreign jurisdictions. With few exceptions, the Company is no longer subject to U.S. federal, state and
local, or non-U.S. income tax examinations by tax authorities for years prior to 2009.
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, 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 authoritative guidance 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 and
other 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 Plans
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.
Net Income Per Share Attributable to Citrix Systems, Inc. Stockholders
Net income per share attributable to Citrix Systems, Inc. stockholders - basic is calculated by dividing income available
to stockholders by the weighted-average number of common shares outstanding during each period. Net income per share
attributable to Citrix Systems, Inc. stockholders - diluted 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 vesting or 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 anti-dilutive effect for the respective periods in which they were outstanding. The
reconciliation of the numerator and denominator of the earnings per share calculation is presented in Note 13.
Reclassifications
During the first quarter of 2012, the Company performed a review of the historical manner of presentation of certain of
its revenue categories and adopted a revised presentation, which the Company believes is more comparable to those presented
by other companies in the industry and better reflects the Company's evolving product and service offerings. As a result,
technical support, hardware maintenance and software updates revenues, which were previously presented in Technical services
and License updates are classified together as License updates and maintenance. A corresponding change was made to rename
Cost of services revenues to Cost of services and maintenance revenues; however, there was no change in classification.
CITRIX SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS