Computer Associates 2010 Annual Report Download - page 68

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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) Presentation of financial statements: The accompanying audited consolidated financial statements of the Company have
been prepared in accordance with U.S. generally accepted accounting principles (GAAP), as defined in the Financial Accounting
Standards Board (FASB) Accounting Standards Codification (ASC) Topic 205. The preparation of financial statements in
conformity with 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. Significant items
subject to such estimates and assumptions include the useful lives of long-lived assets; allowances for doubtful accounts; the
valuation of derivatives, deferred tax assets, fixed assets; share-based compensation; reserves for employee benefit
obligations; sales commissions; income tax uncertainties; and other contingencies. The current economic environment has
increased the degree of uncertainty inherent in those estimates and assumptions.
Certain prior year balances have been reclassified to conform to the current period’s presentation.
(c) 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 (for further information, refer to Note 2, “Acquisitions”).
(d) Adoption of new accounting principles: Effective September 15, 2009, the Company adopted the requirements of FASB
ASC Topic 105 (previously Statement of Financial Accounting Standards (SFAS) No. 168, “FASB Accounting Standards
Codification and the Hierarchy of Generally Accepted Accounting Principles”). FASB ASC Topic 105 is effective for financial
statements issued for interim and annual periods ending after September 15, 2009 and establishes the ASC as the source of
authoritative GAAP, except for rules and interpretive releases of the Securities and Exchange Commission (SEC), which are
sources of authoritative GAAP for SEC registrants. The adoption of the ASC was not intended to change or alter existing GAAP
and therefore did not have any effect on the Company’s consolidated financial statements. References to the relevant ASC
section and the corresponding previously existing GAAP standard have been provided for accounting standards adopted in
fiscal year 2010 but prior to the effective date of the ASC.
Effective April 1, 2009, the Company adopted the fair value measurement and disclosure requirements of FASB ASC Topic 820
(previously SFAS No. 157, “Fair Value Measurements”) for all nonfinancial assets and nonfinancial liabilities, except those that
are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually), for which the
requirements were adopted on April 1, 2008. The April 1, 2009 adoption did not have an effect on the Company’s
consolidated financial statements.
(e) Translation of foreign currencies: 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 average exchange rates.
Adjustments arising from the translation of the foreign currency financial statements of the Company’s subsidiaries into
U.S. dollars are reported as currency translation adjustment in the “Retained earnings” line item in the Consolidated Balance
Sheets.
Gains and losses from foreign currency transactions are included in the “Other expenses (gains), net” line item in the
Consolidated Statements of Operations in the period in which they occur. Foreign currency transaction gains (losses) and the
effect of foreign currency related derivatives, net of taxes, were approximately $(6) million, $7 million and $17 million in the
fiscal years ended March 31, 2010, 2009 and 2008, respectively.
(f) Revenue recognition: The Company begins to recognize revenue from software 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
specified products; (3) license agreement terms are fixed or determinable and free of contingencies or uncertainties that may
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