Computer Associates 2016 Annual Report Download - page 59

the date that the performance targets are established based on the fair value of our stock and our estimate of the level of
achievement of our performance targets. We are required to recalculate the fair value of issued PSUs each reporting period
until the underlying shares are granted. The adjustment is based on the quoted market price of our stock on the reporting
period date. Each quarter, we compare the actual performance we expect to achieve with the performance targets.
Fair Value of Financial Instruments
The measurement of fair value for our financial instruments is based on the authoritative guidance which establishes a fair value
hierarchy that is based on three levels of inputs and requires an entity to maximize the use of observable inputs and minimize
the use of unobservable inputs when measuring fair value. Refer to Note 10, “Fair Value Measurements,” for additional
information.
We are exposed to financial market risks arising from changes in interest rates and foreign exchange rates. Changes in interest
rates could affect our monetary assets and liabilities, and foreign exchange rate changes could affect our foreign currency
denominated monetary assets and liabilities and forecasted transactions. We enter into derivative contracts with the intent of
mitigating a portion of these risks. Refer to Note 9, “Derivatives,” for additional information.
Legal Contingencies
We are currently involved in various legal proceedings and claims. Periodically, we review the status of each significant matter
and assess our potential financial exposure. If the potential loss from any legal proceeding or claim is considered probable and
the amount can be reasonably estimated, we accrue a liability for the estimated loss. Significant judgment is required in both the
determination of the probability of a loss and the determination as to whether the amount of loss is reasonably estimable. Due
to the uncertainties related to these matters, the decision to record an accrual and the amount of accruals recorded are based
only on the information available at the time. As additional information becomes available, we reassess the potential liability
related to our pending litigation and claims, and may revise our estimates. Any revisions could have a material effect on our
results of operations. Refer to Note 11, “Commitments and Contingencies,” in the Notes to the Consolidated Financial
Statements for a description of our material legal proceedings.
New Accounting Pronouncements
New Accounting Pronouncements Recently Adopted
In April 2015, the FASB issued Accounting Standards Update No. 2015-03 (ASU 2015-03), Simplifying the Presentation of Debt
Issuance Costs (Topic 835), which changes the required presentation of debt issuance costs from an asset on the balance sheet to
a deduction from the related debt liability. ASU 2015-03 will be effective for our first quarter of fiscal 2017 and early adoption is
permitted. We elected to early adopt this guidance in the fourth quarter of fiscal 2016 and have applied the new standard
retrospectively to all prior periods. The reclassification of debt issuance costs did not have a material effect on our Consolidated
Balance Sheets at March 31, 2016 and 2015, and had no effect on our other consolidated financial statements. Refer to Note 8,
“Debt,” for additional information on our debt balances.
In September 2015, the FASB issued Accounting Standards Update No. 2015-16 (ASU 2015-16), Simplifying the Accounting for
Measurement-Period Adjustments (Topic 805), which removes the requirement to retrospectively account for adjustments to
preliminary amounts recognized in a business combination. ASU 2015-16 requires the cumulative impact of a measurement
period adjustment (including the impact on prior periods) be recognized in the reporting period in which the adjustment is
identified. ASU 2015-16 will be effective for our first quarter of fiscal 2017 and early adoption is permitted. We elected to early
adopt this guidance in the fourth quarter of fiscal year 2016 and will prospectively apply the new standard to business
combination adjustments identified after the date of adoption. The adoption of this guidance did not have a material effect on
our consolidated financial statements.
In November 2015, the FASB issued Accounting Standards Update No. 2015-17 (ASU 2015-17), Balance Sheet Classification of
Deferred Taxes (Topic 740), to simplify the presentation of deferred taxes in the statement of financial position. Current
guidance requires an entity to separate deferred income tax assets and liabilities into current and noncurrent amounts. The new
guidance requires all deferred tax assets and liabilities to be presented as noncurrent. ASU 2015-17 will be effective for our first
quarter of fiscal 2018 and early adoption is permitted. This guidance may be applied either prospectively to all deferred tax
assets and liabilities, or retrospectively to all periods presented. We elected to early adopt this guidance prospectively in the
fourth quarter of fiscal 2016. As a result, we have presented all deferred tax assets and liabilities as noncurrent on our
Consolidated Balance Sheet at March 31, 2016, but have not reclassified current deferred tax assets and liabilities on our
Consolidated Balance Sheet at March 31, 2015. ASU 2015-17 has no effect on our other consolidated financial statements.
Refer to Note 15, “Income Taxes,” for additional information on our income taxes disclosures.
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