Symantec 2011 Annual Report Download - page 139

the accounting principles establish a hierarchy to determine the selling price used for allocating revenue to the
deliverables as follows: (i) VSOE, (ii) third-party evidence of selling price (“TPE”) and (iii) the best estimate of the
selling price (“ESP”). Our appliance products, SaaS and certain other services are considered to be non-software
elements in our arrangements.
When we are unable to establish a selling price using VSOE or TPE, we use ESP in the allocation of
arrangement consideration. The objective of ESP is to determine the price at which we would transact a sale if the
product or service were sold on a stand-alone basis. The determination of ESP is made through consultation with
and formal approval by our management, taking into consideration the go-to-market strategy and pricing factors.
ESP applies to a small portion of our arrangements with multiple deliverables.
Indirect channel sales
For our Consumer segment, we sell packaged software products through a multi-tiered distribution channel.
We also sell electronic download and packaged products via the Internet. We separately sell annual content update
subscriptions directly to end-users primarily via the Internet. For our consumer products that include content
updates, we recognize revenue ratably over the term of the subscription upon sell-through to end-users, as the
subscription period commences on the date of sale to the end-user. For most other consumer products, we recognize
packaged product revenue on distributor and reseller channel inventory that is not in excess of specified inventory
levels in these channels. We offer the right of return of our products under various policies and programs with our
distributors, resellers, and end-user customers. We estimate and record reserves for product returns as an offset to
revenue. We fully reserve for obsolete products in the distribution channel as an offset to deferred revenue for
products with content updates and to revenue for all other products.
For our Security and Compliance and Storage and Server Management segments, we generally recognize
revenue from the licensing of software products through our indirect sales channel upon sell-through or with
evidence of an end-user. For licensing of our software to OEMs, royalty revenue is recognized when the OEM
reports the sale of the software products to an end-user, generally on a quarterly basis. In addition to license
royalties, some OEMs pay an annual flat fee and/or support royalties for the right to sell maintenance and technical
support to the end-user. We recognize revenue from OEM support royalties and fees ratably over the term of the
support agreement.
We offer channel and end-user rebates for our products. Our estimated reserves for channel volume incentive
rebates are based on distributors’ and resellers’ actual performance against the terms and conditions of volume
incentive rebate programs, which are typically entered into quarterly. Our reserves for end-user rebates are
estimated based on the terms and conditions of the promotional program, actual sales during the promotion, the
amount of actual redemptions received, historical redemption trends by product and by type of promotional
program, and the value of the rebate. We estimate and record reserves for channel and end-user rebates as an offset
to revenue. For consumer products that include content updates, rebates are recorded as a ratable offset to revenue
over the term of the subscription.
Financial Instruments
The following methods were used to estimate the fair value of each class of financial instruments for which it is
practicable to estimate that value:
Cash and Cash Equivalents. We consider all highly liquid investments with an original maturity of three
months or less to be cash equivalents. Cash equivalents are recognized at fair value. As of April 1, 2011, our cash
equivalents consisted of $1.9 billion in money market funds and $204 million in bank securities and deposits. As of
April 2, 2010, our cash equivalents consisted of $2.0 billion in money market funds, $216 million in bank securities
and deposits, and $116 million in government securities.
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SYMANTEC CORPORATION
Notes to Consolidated Financial Statements — (Continued)