Computer Associates 2011 Annual Report Download - page 75

— Level 2: Quoted prices for identical assets and liabilities in markets that are not active, quoted prices for similar assets and
liabilities in active markets or financial instruments for which significant inputs are observable, either directly or
indirectly; and
— Level 3: Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.
See Note 11, “Fair Value Measurements,” for additional information.
(n) Long-lived assets:
Impairment of long-lived assets, excluding goodwill and other intangibles:Long-lived assets are reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If
circumstances require a long-lived asset or asset group be tested for possible impairment, the Company first compares
undiscounted cash flows expected to be generated by that asset or asset group to its carrying value. If the carrying value of
the long-lived asset or asset group is not recoverable on an undiscounted cash flow basis, an impairment is recognized to the
extent that the carrying value exceeds its fair value. Fair value is determined through various valuation techniques including
discounted cash flow models, quoted market values and third-party independent appraisals, as considered necessary.
Property and equipment: Property and equipment are stated at cost. Depreciation and amortization expense is calculated
based on the estimated useful lives of the assets, and is recognized by using the straight-line method. Building and
improvements are estimated to have 5 to 40 year lives, and the remaining property and equipment are estimated to have 3
to 7 year lives.
Capitalized development costs: Capitalized development costs in the accompanying Consolidated Balance Sheets include costs
associated with the development of computer software to be sold, leased or otherwise marketed. Software development costs
associated with new products and significant enhancements to existing software products are expensed as incurred until
technological feasibility has been established. Annual amortization of capitalized software costs is the greater of the amount
computed using the ratio that current gross revenues for a product bear to the total of current and anticipated future gross
revenues for that product or the straight-line method over the remaining estimated economic life of the software product,
generally estimated to be 5 years from the date the product became available for general release to customers. The Company
generally recognizes amortization expense for capitalized software costs using the straight-line method.
Impairment of goodwill and other intangible assets: Purchased software products and other intangible assets subject to
amortization are reviewed for impairment quarterly and whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable.
Intangible assets with indefinite lives are not subject to amortization. Goodwill and indefinite-lived intangible assets are
tested annually for impairment during the fourth quarter of the fiscal year, or whenever events or changes in circumstances
indicate that the carrying amount of the asset may not be fully recoverable. The Company also evaluates indefinite-lived
intangible assets for impairment whenever events or changes in business circumstances indicate that the indefinite useful
lives assumption of these assets is no longer appropriate. The Company evaluates goodwill impairment based on a single
reporting unit.
Purchased software products: Purchased software products primarily include the cost of software technology acquired in
business combinations. The cost of such products is equal to the fair value of the acquired software technology at the
acquisition date. The Company’s records straight-line amortization of purchased software costs over their remaining economic
lives, estimated to be between 3 and 10 years from the date of acquisition.
Other intangible assets: Other intangible assets include both customer relationships and trademarks/trade names. The
Company amortizes all other intangible assets over their remaining economic lives, estimated to be between 2 and 12 years
from the date of acquisition.
Goodwill: Goodwill represents the excess of the aggregate purchase price over the fair value of the net tangible and intangible
assets, including in-process research and development, acquired by the Company in a purchase business combination.
Goodwill is not amortized into results of operations but instead is reviewed for impairment.
See Note 7, “Long-Lived Assets,” for additional information.
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