Computer Associates 2009 Annual Report Download - page 77

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Notes to the Consolidated Financial Statements
Note 1 — Significant Accounting Policies
(a) Description of Business: CA, Inc. and subsidiaries (the Company) develops, markets, delivers and licenses software
products and services.
(b) Principles of Consolidation: The Consolidated Financial Statements include the accounts of the Company and its
majority-owned and controlled subsidiaries. Investments in affiliates owned 50% or less are accounted for by the equity
method. Intercompany balances and transactions have been eliminated in consolidation. Companies acquired during
each reporting period are reflected in the results of the Company effective from their respective dates of acquisition
through the end of the reporting period (refer to Note 2, “Acquisitions and Divestitures” in these Notes to the
Consolidated Financial Statements for additional information).
(c) Divestiture: In November 2006, the Company sold its 70% equity interest in Benit Company (Benit) to the minority
interest holder. As a result, Benit has been classified as a discontinued operation and its results of operations have been
reclassified in the Consolidated Statements of Operations for the fiscal year ended March 31, 2007. The cash flows for
Benit were deemed immaterial for separate presentation as a discontinued operation in the Consolidated Balance Sheet
and Consolidated Statements of Cash Flows. All related footnotes to the Consolidated Financial Statements have been
adjusted to exclude the effect of the operating results of Benit. Refer to Note 2, “Acquisitions and Divestitures,” in these
Notes to the Consolidated Financial Statements for additional information.
(d) Use of Estimates: The preparation of financial statements in conformity with generally accepted accounting principles
in the United States of America (GAAP) requires management to make estimates and assumptions that affect the
amounts reported in the financial statements and accompanying notes. Although these estimates are based on
management’s knowledge of current events and actions it may undertake in the future, these estimates may ultimately
differ from actual results.
(e) Translation of Foreign Currencies: Foreign currency assets and liabilities of the Company’s international subsidiaries are
translated using the exchange rates in effect at the balance sheet date. Results of operations are translated using the
average exchange rates prevailing throughout the year. The effects of exchange rate fluctuations on translating foreign
currency assets and liabilities into U.S. dollars are accumulated as part of the foreign currency translation adjustment in
Stockholders’ Equity. Gains and losses from foreign currency transactions are included in the “Other (gains) expenses,
net” line item in the Consolidated Statements of Operations in the period in which they occur. Net income includes
exchange transaction gains (losses) and the impact of derivatives, net of taxes, of approximately $7 million, $17 million
and $0 million in the fiscal years ended March 31, 2009, 2008 and 2007, respectively. Refer to Note 4, “Derivatives and
Fair Value Measurements,” for additional information.
(f) Revenue Recognition: The Company generates revenue from the following primary sources: (1) licensing software
products; (2) providing customer technical support (referred to as “maintenance”); and (3) providing professional
services, such as product implementation, consulting and education. Revenue is recorded net of applicable sales taxes.
The Company recognizes revenue pursuant to the requirements of Statement of Position (SOP) 97-2, “Software Revenue
Recognition,” issued by the American Institute of Certified Public Accountants, as amended by SOP 98-9, “Modification of
SOP 97-2, Software Revenue Recognition, With Respect to Certain Transactions.” In accordance with SOP 97-2, the Company
begins to recognize revenue from licensing and maintenance when all of the following criteria are met: (1) the Company
has evidence of an arrangement with a customer; (2) the Company delivers the products; (3) license agreement terms
are fixed or determinable and free of contingencies or uncertainties that may alter the agreement such that it may not
be complete and final; and (4) collection is probable.
The Company’s software licenses generally do not include acceptance provisions. An acceptance provision allows a
customer to test the software for a defined period of time before committing to license the software. If a license
agreement includes an acceptance provision, the Company does not recognize revenue until the earlier of the receipt of
a written customer acceptance or, if not notified by the customer to cancel the license agreement, the expiration of the
acceptance period.
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