Citrix 2000 Annual Report Download - page 45

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CITRIX SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS −− (CONTINUED)
Intangible assets consist of the following:
DECEMBER 31
−−−−−−−−−−−−−−−−−−−−
2000 1999
−−−−−−−− −−−−−−−−
(IN THOUSANDS)
Core technology............................................. $ 37,650 $ 46,730
Goodwill and other intangibles.............................. 73,900 45,454
−−−−−−−− −−−−−−−−
111,550 92,184
Less accumulated amortization............................... (59,211) (28,788)
−−−−−−−− −−−−−−−−
$ 52,339 $ 63,396
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Revenue Recognition
Revenue is recognized when earned. The Company's revenue recognition
policies are in compliance with the American Institute of Certified Public
Accountants Statement of Position ("SOP") 97−2 (as amended by SOP 98−4 and SOP
98−9) and related interpretations, "Software Revenue Recognition." Product
revenues are recognized upon shipment of the software product only if no
significant Company obligations remain, the fee is fixed or determinable, and
collection of the resulting receivable is deemed probable. In May 1997, the
Company entered into a five year joint license, development and marketing
agreement with Microsoft, as amended (the "Development Agreement,") pursuant to
which the Company licensed its multi−user Windows NT extensions to Microsoft for
inclusion in future versions of Windows NT server software. The initial fee of
$75 million relating to the Development Agreement is being recognized ratably
over the five−year term of the contract, which began in May 1997. The additional
$100 million received pursuant to the Development Agreement, as amended, is
being recognized ratably over the remaining term of the contract, effective
April 1998. In the case of non−cancelable product licensing arrangements under
which certain Original Equipment Manufacturers ("OEMs") have software
reproduction rights, initial recognition of revenue also requires delivery and
customer acceptance of the product master or first copy. Subsequent recognition
of revenues is based upon reported royalties from the OEMs. Revenue from
packaged product sales to distributors and resellers is recorded when related
products are shipped. The Company also distributes software through electronic
licensing. These revenues are recognized when the customer is provided with the
activation keys that allow the customer to take immediate possession of the
software pursuant to an agreement or purchase order. In software arrangements
that include rights to multiple software products, post−contract customer
support ("PCS"), and/or other services, the Company allocates the total
arrangement fee among each deliverable based on the relative fair value of each
of the deliverables determined based on vendor−specific objective evidence
("VSOE"). The Company sells software and PCS separately and VSOE is determined
by the price charged when each element is sold separately. Product returns and
sales allowances, including stock rotations, are estimated and provided for at
the time of sale. Non−recurring engineering fees are recognized ratably as the
work is performed. Revenues from training and consulting are recognized when the
services are performed. Service and subscription revenues from customer
maintenance fees for ongoing customer support and product updates and upgrades
are based on the price charged or derived value of the undelivered elements and
are recognized ratably over the term of the contract, which is typically 12−24
months. Service revenues are included in net revenues on the face of the
consolidated statements of income.
The Company provides most of its distributors with product return rights
for stock balancing and price protection rights. Stock balancing rights permit
distributors to return products to the Company for credit within specified
limits and subject to ordering an equal amount of the Company's products. Price
protection rights require that the Company grant retroactive price adjustments
for inventories of the Company's products held by distributors if the Company
lowers its prices for such products. Allowances for estimated product returns
amounted to approximately $9,170,000 and $6,696,000 at December 31, 2000 and
1999, respectively.
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