Computer Associates 2009 Annual Report Download - page 43

assist the customer by arranging financing on their behalf through a third party financial institution. Alternatively, we
may decide to transfer our rights to the future committed installment payments due under the license agreement to a
third party financial institution in exchange for a cash payment. Once transferred, the future committed installments are
payable by the customer to the third party financial institution. Whether the future committed installments have been
financed directly by the customer with our assistance or by the transfer of our rights to future committed installments
to a third party, such financing agreements may contain limited recourse provisions with respect to our continued
performance under the license agreements. Based on our historical experience, we believe that any liability that we may
incur as a result of these limited recourse provisions will be immaterial.
Amounts billed or collected as a result of a single installment for the entire contract value, or a substantial portion of
the contract value, rather than being invoiced and collected over the life of the license agreement are reflected in the
liability section of the Consolidated Balance Sheets as “Deferred revenue (billed or collected).” Amounts received from
either the customer or a third-party financial institution in the current period that are attributable to later years of a
license agreement have a positive impact on billings and cash provided by operating activities. Accordingly, to the extent
such collections are attributable to the later years of a license agreement, billings and cash provided by operating
activities during the license’s later years will be lower than if the payments were received over the license term. We are
unable to predict with certainty the amount of cash to be collected from single installments for the entire contract value,
or a substantial portion of the contract value, under new or renewed license agreements to be executed in future
periods.
For fiscal 2009, gross receipts related to single installments for the entire contract value, or a substantial portion of the
contract value, were $526 million, compared with $641 million in fiscal 2008. These amounts include transactions
financed through third parties of $98 million and $257 million for fiscal 2009 and fiscal 2008, respectively.
In any fiscal year, cash provided by continuing operating activities typically increases in each consecutive quarter
throughout the fiscal year in accordance with our bookings cycle, with the fourth quarter being the highest and the first
quarter being the lowest. The timing of net cash provided by operating activities during the fiscal year is also affected by
many other factors, including the timing of any customer financing or transfer of our interest in such contractual
installments and the level and timing of expenditures.
In any quarter, we may receive payments in advance of the contractually committed date on which the payments were
otherwise due. In limited circumstances, we may offer discounts to customers to ensure payment in the current period
of invoices that have been billed, but might not otherwise be paid until a subsequent period because of payment terms
or other factors. Historically, any such discounts have not been material.
Our estimate of the fair value of net installment accounts receivable recorded under the prior business model
approximates carrying value. Amounts due from customers under our current business model are offset by deferred
revenue related to these license agreements, leaving no or minimal net carrying value for such amounts. The fair value of
such amounts may exceed, equal, or be less than this carrying value but cannot be practically assessed since there is no
existing market for a pool of customer receivables with contractual commitments similar to those owned by us. The
actual fair value may not be known until these amounts are sold, securitized or collected. Although these customer
license agreements commit the customer to payment under a fixed schedule, to the extent amounts are not yet due and
payable by the customer, the agreements are considered executory in nature due to our ongoing commitment to provide
maintenance and unspecified future software products as part of the agreement terms.
We can estimate the total amounts to be billed from committed contracts, referred to as our billings backlog, and the
total amount to be recognized as revenue from committed contracts, referred to as our revenue backlog. The aggregate
amounts of our billings backlog and trade and installment receivables already reflected on our Consolidated Balance
Sheets represent the amounts we expect to collect in the future from committed contracts.
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