VMware 2013 Annual Report Download - page 81

Table of Contents VMware, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
initially approximately $7 million and increase by 3% annually. VMware is also responsible for paying all taxes, insurance and other expenses necessary to
operate the parcel.
As of December 31, 2013 and 2012 , construction in progress primarily represented buildings and site improvements related to VMware’s Palo Alto
campus expansion that had not yet been placed into service.
I. Accrued Expenses and Other
Accrued expenses and other as of December 31, 2013 and 2012 consisted of the following (table in millions):
Accrued partner liabilities relate to rebates and marketing development fund accruals for channel partners, system vendors and systems integrators, as
well as accrued royalties.
J. Unearned Revenues
Unearned revenues as of December 31, 2013 and 2012 consisted of the following (table in millions):
Unearned license revenues are either recognized ratably, recognized upon delivery of existing or future products or services, or will be recognized
ratably upon delivery of future products or services. Future products include, in some cases, products that are offered as part of product promotions where the
purchaser of an existing product is entitled to receive a promotional product at no additional charge. VMware regularly offers product promotions to improve
awareness of its emerging products. To the extent promotional products have not been delivered and VSOE of fair value is not established, revenue for the
entire order is deferred until such time as all product delivery obligations have been fulfilled. Unearned license revenue may also be recognized ratably,
which is generally due to a right to receive unspecified future products.
Unearned software maintenance revenues are attributable to VMware’s maintenance contracts and are recognized ratably, typically over terms of one to
five years. Unearned professional services revenues result primarily from prepaid professional services, including training, and are recognized as the services
are delivered.
K. Note Payable to EMC
In June 2011, VMware and EMC amended and restated a promissory note issued by VMware to EMC as a dividend in April 2007 to extend the maturity
date of the note to April 16, 2015 and to modify the principal amount of the note to EMC to reflect the outstanding balance of $450 million . The interest rate
resets quarterly at the 90-day LIBOR plus 55 basis points. For the years ended December 31, 2013 , 2012 and 2011 , $4 million , $5 million and $4 million ,
respectively, of interest expense were recorded related to the note payable. See Note R to the consolidated financial statements for information regarding a
note exchange agreement in the aggregate principal amount of $1,500 million
entered into between VMware and EMC on January 21, 2014, which exchanges
VMware’s promissory note issued to EMC.
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December 31,
2013
2012
Salaries, commissions, bonuses, and benefits
$
303
$
292
Accrued partner liabilities
135
129
Other
170
223
Total
$
608
$
644
December 31,
2013
2012
Unearned license revenues
$
465
$
463
Unearned software maintenance revenues
3,304
2,755
Unearned professional services revenues
323
243
Total unearned revenues
$
4,092
$
3,461