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CITRIX SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-11
Estimated future amortization expense of intangible assets with finite lives is as follows (in thousands):
Year ending December 31,
2015 $ 100,286
2016 85,000
2017 64,220
2018 53,854
2019 34,305
Thereafter 53,052
Total $ 390,717
Software Development Costs
The authoritative guidance requires certain internal software development costs related to software to be sold to be
capitalized upon the establishment of technological feasibility. The Company's software development costs incurred subsequent
to achieving technological feasibility have not been significant and substantially all software development costs have been
expensed as incurred.
Internal Use Software
In accordance with the authoritative guidance, the Company capitalizes external direct costs of materials and services and
internal costs such as payroll and benefits of those employees directly associated with the development of new functionality in
internal use software and software developed related to its Mobility Apps products. The amount of costs capitalized in 2014 and
2013 relating to internal use software was $79.1 million and $62.7 million, respectively. 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. The total amounts charged to expense relating to internal use software was
approximately $66.8 million, $58.6 million and $44.5 million, during the years ended December 31, 2014, 2013 and 2012,
respectively.
Revenue Recognition
Net revenues include the following categories: Product and licenses, SaaS from the Mobility Apps division, License
updates and maintenance and Professional services. Product and licenses 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, partner incentive programs and provisions for returns. Shipping charges billed to
customers are included in Product and license revenue and the related shipping costs are included in Cost of product and
license revenue. SaaS revenues consist primarily of fees related to online service agreements, which are recognized ratably over
the contract term, which is typically 12 months. In addition, SaaS revenues may also include set-up fees, which are recognized
ratably over the contract term or the expected customer life, whichever is longer. License updates and maintenance revenues
consist of fees related to the Subscription Advantage program and maintenance fees, which include technical support and
hardware and software maintenance. The Company licenses many of its virtualization products bundled with a one-year
contract for its Subscription Advantage program. 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. Subscription Advantage and maintenance fees are recognized ratably over the term of the
contract, which is typically 12 to 24 months. The Company capitalizes certain third-party commissions related to Subscription
Advantage, maintenance and support renewals. The capitalized commissions are amortized to Sales, marketing and services
expense at the time the related deferred revenue is recognized as revenue. Hardware and software maintenance and support
contracts are typically sold separately. Hardware maintenance includes technical support, the latest software upgrades and
replacement of malfunctioning appliances. Dedicated account management is available as an add-on to the program for a
higher level of service. Software maintenance includes unlimited support with product version upgrades. Professional services
revenues are comprised of fees from consulting services related to the implementation of the Company’s products and fees
from product training and certification, which are recognized as the services are provided.
The Company recognizes 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 the Company has no remaining obligations;
the fee is fixed or determinable; and collectability is probable. The Company defines these four criteria as follows: