Citrix 2006 Annual Report Download - page 79

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Citrix Systems, Inc.  Annual Report
Intangible assets consist of the following (in thousands):
December 31, 2006
Gross
Carrying
Amount
Accumulated
Amortization
Weighted
Average
Life
Core and product technologies $ 137,071 $ 55,301 5.58 years
Other 85,754 37,062 5.29 years
Total $ 222,825 $ 92,363 5.47 years
December 31, 2005
Gross
Carrying
Amount
Accumulated
Amortization
Weighted
Average
Life
Core and product technologies $ 165,975 $ 84,255 5.27 years
Other 81,254 25,641 4.88 years
Total $ 247,229 $ 109,896 5.14 years
Other intangible assets consist primarily of customer
relationships, trade names, covenants not to compete
and patents. Amortization of product related intangible
assets includes amortization of core and product
technologies and patents and is reported as a cost of
revenues in the accompanying consolidated statements of
income. Amortization of other intangible assets includes
amortization of customer relationships, trade names and
covenants not to compete and is reported as an operating
expense in the accompanying consolidated statements
of income.
Estimated future annual amortization expense is as follows
(in thousands):
Year ending December 31,
2007 $ 33,319
2008 30,245
2009 25,609
2010 22,205
2011 11,686
During 2006, the Company retired approximately $56.8
million of fully amortized intangible assets that were no
longer in use from its books. During 2004, the Company
reclassified certain acquired intangible assets to goodwill
to adjust the purchase price allocation resulting from a
2001 acquisition. The adjustment resulted in a $4.4 million
reduction of amortization expense, net of related tax effect
of $2.8 million in 2004.
Software Development Costs
SFAS No. 86, Accounting for the Costs of Computer
Software to be Sold, Leased, or Otherwise Marketed,
requires certain 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. Software
development costs incurred beyond the establishment of
technological feasibility have not been significant.
The Company accounts for software developed for internal
use pursuant to the American Institute of Certified Public
Accountants Statement of Position (“SOP”) No. 98-1,
Accounting for the Costs of Computer Software Developed
or Obtained for Internal Use . Pursuant to SOP No. 98-1,
the Company capitalizes external direct costs of materials
and services used in the project and internal costs such as
payroll and benefits of those employees directly associated
with the development of internal use software and software
developed related to its online service offerings. The
amount of costs capitalized in 2006 and 2005 relating to
internal use software was $18.7 million and $7.2 million,
respectively. These costs are being amortized over the
estimated useful life of the software, which is generally