Computer Associates 2011 Annual Report Download - page 74

performance targets. Additionally, the grants are subject to the approval of the Company’s Compensation and Human
Resources Committee of the Board of Directors (the Committee), which has discretion to reduce any award for any reason. The
value of the PSU awards is remeasured each reporting period until the Committee approves attainment of the specified
performance targets, at which time a grant date is deemed to have been achieved for accounting purposes, the value of the
award is fixed and any remaining unrecognized compensation expense is recognized over the remaining time-based vesting
period. See Note 15, “Stock Plans”, for additional information.
(i) Net income per share: Unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend
equivalents (whether paid or unpaid) are participating securities and are included in the computation of net income per share
under the two-class method. Under the two-class method, net income is reduced by the amount of dividends declared in the
period for each class of common stock and participating securities. The remaining undistributed income is then allocated to
common stock and participating securities as if all of the net income for the period had been distributed. Basic net income
per common share excludes dilution and is calculated by dividing net income allocable to common shares by the weighted
average number of common shares outstanding for the period. Diluted net income per common share is calculated by
dividing net income allocable to common shares by the weighted average number of common shares outstanding at the
balance sheet date, as adjusted for the potential dilutive effect of non-participating share-based awards and convertible notes.
See Note 14, “Income from Continuing Operations Per Common Share”, for additional information.
(j) Concentration of credit risk: Financial instruments that potentially subject the Company to concentration of credit risk
consist primarily of cash equivalents, derivatives and accounts receivable. The Company historically has not experienced any
losses in its cash and cash equivalent portfolios.
Amounts included in accounts receivable expected to be collected from customers, as disclosed in Note 6, “Trade and
Installment Accounts Receivable”, have limited exposure to concentration of credit risk due to the diverse customer base and
geographic areas covered by operations.
(k) Cash and cash equivalents: All financial instruments purchased with an original maturity of three months or less at the
time of purchase are considered cash equivalents. The Company’s cash and cash equivalents are held by its subsidiaries
throughout the world, frequently in each subsidiary’s respective functional currency which may not be the U.S. dollar.
Approximately 47% and 46% of cash and cash equivalents were maintained outside the United States at March 31, 2011 and
2010, respectively.
Total interest income, which primarily relates to the Company’s cash and cash equivalent balances and marketable securities,
for fiscal year 2011, 2010 and 2009 was approximately $24 million, $26 million and $70 million, respectively, and is
included in the “Interest expense, net” line item in the Consolidated Statements of Operations.
(l)Marketable securities: All marketable securities are classified as available-for-sale securities and are recorded at fair value.
Unrealized holding gains and losses, net of the related tax effect, are excluded from earnings and are reported as a separate
component of accumulated other comprehensive income until realized. Premiums and discounts on debt securities recorded
at the date of purchase are recognized in “Interest expense, net” using the effective interest method. Realized gains and
losses on sales of all such investments are reported in “Interest expense, net” and are computed using the specific
identification cost method.
For marketable securities in an unrealized loss position, the Company is required to assess whether it intends to sell the
security or will more likely than not be required to sell the security before the recovery of its amortized cost basis less any
current-period credit loss. If either of these conditions is met, an other-than-temporary impairment on the security is
recognized in “Interest expense, net” equal to the difference between its fair value and amortized cost basis. See Note 5,
“Marketable Securities”, for additional information.
(m) Fair value measurements: Fair value is the price that would be received for an asset or the amount paid to transfer a
liability in an orderly transaction between market participants. The Company is required to classify certain assets and
liabilities based on the following fair value hierarchy:
— Level 1: Quoted prices in active markets that are unadjusted and accessible at the measurement date for identical,
unrestricted assets or liabilities;
62