Citrix 2006 Annual Report Download - page 35

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
Citrix Systems, Inc.  Annual Report
In the ordinary course of global business, there are
transactions for which the ultimate tax outcome is
uncertain, thus judgment is required in determining the
worldwide provision for income taxes. We provide for
income taxes on transactions based on our estimate of the
probable liability. We adjust our provision as appropriate for
changes that impact our underlying judgments. Changes
that impact provision estimates include such items as
jurisdictional interpretations on tax filing positions based
on the results of tax audits and general tax authority
rulings. Due to the evolving nature of tax rules combined
with the large number of jurisdictions in which we operate,
it is possible that our estimates of our tax liability and
the realizability of our deferred tax assets could change
in the future, which may result in additional tax liabilities
and adversely affect our results of operations, financial
condition and cash flows.
The following discussion relating to the individual financial
statement captions, our overall financial performance,
operations and financial position should be read in
conjunction with the factors and events described in
“Management’s Discussion and Analysis of Financial
Condition and Results of Operations — Overview” which
could impact our future performance and financial position.
Results of Operations
Our operations consist of the design, development
and marketing of technology solutions that deliver
applications on-demand with high performance,
enhanced security and improved TCO. We market and
license our products through multiple channels such
as value added resellers, channel distributors, system
integrators, independent software vendors, our Websites
and original equipment manufacturers.
Our cost of services revenues and operating expenses
increased for 2006 when compared to 2005 due to the
recognition of stock-based compensation expense related
to our adoption of SFAS No. 123R. See “Management’s
Discussion and Analysis of Financial Condition and
Results of Operations — Critical Accounting Policies and
Estimates” and Notes 3 and 7 to our consolidated financial
statements included elsewhere in this Annual Report for
more information related to our adoption of SFAS No. 123R.