Computer Associates 2016 Annual Report Download - page 79

In addition to stock options, restricted share awards (RSAs) and restricted share units (RSUs) with time-based vesting, the
Company issues performance share units (PSUs). Compensation costs for the PSUs are amortized over the requisite service
periods based on the expected level of achievement of the performance targets. At the conclusion of the performance periods,
the applicable number of shares of RSAs, RSUs or unrestricted shares granted may vary based on the level of achievement of
the 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 Compensation Committee), which has discretion to reduce any award for
any reason. The value of the PSU awards is remeasured each reporting period until the Compensation 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. Refer to Note 14, “Stock Plans,” for additional information.
(j) Net Income Per Common 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. Refer to Note 13, “Income from
Continuing Operations Per Common Share,” for additional information.
(k) Concentration of Credit Risk: Financial instruments that potentially subject the Company to concentration of credit risk
consist primarily of cash and cash equivalents, investments, derivatives and accounts receivable. The Company historically has
not experienced any material losses in its cash and cash equivalent or investment portfolios.
Amounts included in accounts receivable expected to be collected from customers, as disclosed in Note 5, “Trade Accounts
Receivable,” have limited exposure to concentration of credit risk due to the diverse customer base and geographic areas
covered by operations.
(l) 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 76%
and 69% of cash and cash equivalents were maintained outside the United States at March 31, 2016 and 2015, respectively.
Total interest income, which primarily relates to the Company’s cash and cash equivalent balances and investments, for fiscal
years 2016, 2015 and 2014 was approximately $30 million, $30 million and $21 million, respectively, and is included in “Interest
expense, net” in the Consolidated Statements of Operations.
(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;
• Level 2: Quoted prices for identical assets and liabilities in markets that are not active, or 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.
Refer to Note 10, “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 or, when available, quoted market values and third-party appraisals.
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