VMware 2014 Annual Report Download - page 92

Table of Contents VMware, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
its most significant international jurisdiction, Ireland, the open tax years begin as of 2010. Based on the timing and outcome of examinations of
VMware’s international subsidiaries, the result of the expiration of statutes of limitations for specific jurisdictions or the timing and result of
ruling requests from taxing authorities, it is reasonably possible that within the next 12 months total unrecognized tax benefits could be
potentially reduced by approximately $14 million . Audit outcomes and the timing of audit settlements are subject to significant uncertainty.
L. Commitments and Contingencies
Litigation
VMware and the U.S. General Services Administration (“GSA”) and the Department of Justice (“DOJ”) are in ongoing discussions
regarding VMware’s government sales practices covering the period between 2006 and 2013. A total of $11 million was accrued for this matter
during the second quarter of 2014 and the amount is included in accrued expenses and other in the consolidated balance sheets. VMware has
continued discussions on this matter with both the GSA and DOJ. VMware believes a loss in excess of the estimated $11 million liability is
currently not determinable but final resolution of the matter could be materially different from VMware's current estimate.
VMware is also subject to other legal, administrative and regulatory proceedings, claims, demands and investigations in the ordinary course
of business, including claims with respect to commercial, product liability, intellectual property, employment, class action, whistleblower and
other matters. From time to time, VMware also receives inquiries from and has ongoing discussions with government entities on various matters.
VMware accrues for a liability when a determination has been made that a loss is both probable of occurrence and the amount of the loss can be
reasonably estimated. Significant judgment is required in both the determination of probability and the determination as to whether a loss is
reasonably estimable. In making such judgments, VMware considers the impact of negotiations, settlements, rulings, advice of legal counsel and
other information and events pertaining to a particular matter. Legal costs are generally recognized as expense when incurred. As of
December 31, 2014 and December 31, 2013 , amounts accrued relating to these other matters arising as part of the ordinary course of business
were considered immaterial. To the extent there is a reasonable possibility that the losses could exceed the amounts already accrued, VMware
believes that the amount of any such additional loss would also be immaterial to VMware’s consolidated financial position, results of operations
and cash flows.
Operating Lease and Other Contractual Commitments
VMware leases office facilities and equipment under various operating leases. Rent expense for the years ended December 31, 2014 , 2013
and 2012 was $85 million , $67 million and $62 million , respectively. VMware’s minimum future lease commitments and other contractual
commitments at December 31, 2014 were as follows (table in millions):
(1)
Consisting of various contractual agreements, which include commitments on the lease for VMware’s Washington data center facility and
asset retirement obligations.
The amount of the future lease commitments after 2019 is primarily for the ground leases on VMware’s Palo Alto, California headquarter
facilities, which expire in 2046 . As several of VMware’s operating leases are payable in foreign currencies, the operating lease payments may
fluctuate in response to changes in the exchange rate between the U.S. dollar and the foreign currencies in which the commitments are payable.
87
Future Lease
Commitments
Purchase
Obligations
Other Contractual
Commitments
(1)
Total
2015
$
81
$
47
$
8
$
136
2016
72
48
9
129
2017
60
—
7
67
2018
46
—
7
53
2019
37
—
3
40
Thereafter
602
—
15
617
Total minimum lease payments
$
898
$
95
$
49
$
1,042