Citrix 2000 Annual Report Download - page 47

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CITRIX SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS −− (CONTINUED)
records it at the time of product sale. The Company recognized advertising
expenses of approximately $15,390,000, $12,958,000, and $9,453,000 during the
years ended December 31, 2000, 1999, and 1998, respectively. These amounts are
included in sales, marketing and support expenses.
Income Taxes
Deferred income tax assets and liabilities are determined based upon
differences between the financial statement and income tax bases of assets and
liabilities using enacted tax rates in effect for the year in which the
differences are expected to reverse. In July 1999, the Company changed its
organizational structure whereby it moved certain operational and administrative
processes to overseas subsidiaries. The restructuring resulted in foreign
earnings being taxed at lower foreign tax rates. These earnings will be
permanently reinvested in order to fund the Company's growth in overseas
markets.
Software Development Costs
Statement of Financial Accounting Standards ("SFAS") No. 86 "Accounting for
the Costs of Computer Software to be Sold, Leased or Otherwise Marketed"
requires software development costs to be capitalized upon the establishment of
technological feasibility. The establishment of technological feasibility and
the ongoing assessment of the recoverability of these costs requires
considerable judgment by management with respect to certain external factors
such as anticipated future revenue, estimated economic life, and changes in
software and hardware technologies. Capitalizable software development costs
have not been significant and have been expensed as incurred.
Business and Other Risks
The Company's operating results and financial condition have varied and may
in the future vary significantly depending on a number of factors. The following
factors may have a material adverse effect upon the Company's business, results
of operations and financial conditions:
Use of Estimates. The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the consolidated
financial statements and accompanying notes. While the Company believes that
such estimates are fair when considered in conjunction with the consolidated
financial position and results of operations taken as a whole, the actual
amounts of such estimates, when known, will vary from these estimates.
Reliance Upon Strategic Relationship. The party to the Development
Agreement is the leading provider of desktop operating systems. The Company is
dependent upon the license of certain key technology from this party including
certain source and object code licenses, technical support and other materials.
The Company is also dependent on its strategic alliance agreement with this
party, which provides for cooperation in the development of technologies for
advanced operating systems, and the promotion of advanced application program
interfaces. Additionally, this party has significantly greater financial,
technical, sales and marketing and other resources than the Company.
Product Concentration. The Company anticipates that one of its product
technologies and future derivative products and product lines based upon this
technology, if any, will constitute a majority of its revenue for the
foreseeable future. The Company may experience declines in demand for products
based on this technology, whether as a result of new competitive product
releases, price competition, lack of success of its strategic partners,
technological change or other factors.
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