Computer Associates 2016 Annual Report Download - page 55

Effect of Foreign Exchange Rate Changes
There was a $24 million favorable impact to our cash balances in fiscal 2016 predominantly due to the weakening of the U.S.
dollar against the euro (6%) and the Israeli shekel (6%), partially offset by the strengthening of the U.S. dollar against the
British pound sterling (3%) and the Brazilian real (11%).
There was a $532 million unfavorable impact to our cash balances in fiscal 2015 predominantly due to the strengthening of the
U.S. dollar against the euro (22%), the Brazilian real (29%), the British pound sterling (11%), the Australian dollar (18%), the
Israeli shekel (12%), the Norwegian krone (26%), the Japanese yen (14%) and the Danish krone (22%).
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements with unconsolidated entities or related parties and, accordingly, off-balance
sheet risks to our liquidity and capital resources from unconsolidated entities are limited.
Contractual Obligations and Commitments
We have commitments under certain contractual arrangements to make future payments for goods and services. These
contractual arrangements secure the rights to various assets and services to be used in the future in the normal course of
business. For example, we are contractually committed to make certain minimum lease payments for the use of property under
operating lease agreements. In accordance with current accounting rules, the future rights and related obligations pertaining to
such contractual arrangements are not reported as assets or liabilities on our Consolidated Balance Sheets. We expect to fund
these contractual arrangements with cash generated from operations in the normal course of business.
The following table summarizes our contractual arrangements at March 31, 2016 and the timing and effect that those
commitments are expected to have on our liquidity and cash flow in future periods. In addition, the table summarizes the timing
of payments on our debt obligations as reported on our Consolidated Balance Sheet at March 31, 2016.
Payments Due By Period
Contractual Obligations Total
Less Than
1 Year
1–3
Years
3–5
Years
More Than
5 Years
(in millions)
Long-term debt obligations (inclusive of interest) $ 2,343 $ 84 $ 445 $1,285 $ 529
Operating lease obligations(1) 419 83 140 111 85
Purchase obligations 173 91 79 3 —
Other obligations(2) 94 19 32 20 23
Total $ 3,029 $ 277 $ 696 $1,419 $ 637
(1) The contractual obligations for noncurrent operating leases exclude sublease income totaling $34 million expected to be received in the following periods: $6 million (less than 1 year);
$13 million (1–3 years); $11 million (3–5 years); and $4 million (more than 5 years).
(2) $162 million of estimated liabilities related to unrecognized tax benefits are excluded from the contractual obligations table because we could not make a reasonable estimate of when
those amounts will become payable.
Critical Accounting Policies and Estimates
We review our financial reporting and disclosure practices and accounting policies quarterly to help ensure that they provide
accurate and transparent information relative to the current economic and business environment. Note 1, “Significant
Accounting Policies” in the Notes to the Consolidated Financial Statements contains a summary of the significant accounting
policies that we use. Many of these accounting policies involve complex situations and require a high degree of judgment, either
in the application and interpretation of existing accounting literature or in the development of estimates that affect our financial
statements. On an ongoing basis, we evaluate our estimates and judgments based on historical experience as well as other
factors that we believe to be reasonable under the circumstances. These estimates may change in the future if underlying
assumptions or factors change.
We consider the following significant accounting policies to be critical because of their complexity and the high degree of
judgment involved in implementing them.
Revenue Recognition
We generate revenue from the following primary sources: (1) licensing software products, including SaaS license agreements;
(2) providing customer technical support (referred to as maintenance); and (3) providing professional services, such as product
implementation, consulting, customer education and customer training.
Software license agreements under our subscription model include the right to receive and use unspecified future software
products for no additional fee during the term of the agreement. We are required under generally accepted accounting
principles (GAAP) to recognize revenue from these subscription licenses ratably over the term of the agreement. These
amounts are recorded as subscription and maintenance revenue.
We also license our software products without the right to unspecified future software products. Revenue from these
arrangements is either recognized at the inception of the license agreement (up-front basis) or ratably over the term of any
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