Citrix 2007 Annual Report Download - page 110

CITRIX SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Neither the purported stockholder derivative actions nor the demand letter described above seeks to recover
amounts from the Company.
During the course of our stock option investigation, the Company has periodically discussed the results of
this investigation with the staff of the Securities and Exchange Commission. On January 30, 2008, the Company
received a letter from the SEC Staff stating that the Staff has completed its investigation as to the Company and
does not intend to recommend any enforcement action by the SEC against the Company.
In addition, the Company is a defendant in various matters of litigation generally arising out of the normal
course of business. Although it is difficult to predict the ultimate outcome of these cases, management believes,
based on discussions with counsel, that any ultimate outcome would not materially affect the Company’s
financial position, results of operations or cash flows.
Guarantees
FIN No. 45, Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others, requires certain guarantees to be recorded at fair value and requires a
guarantor to make disclosures, even when the likelihood of making any payments under the guarantee is remote.
For those guarantees and indemnifications that do not fall within the initial recognition and measurement
requirements of FIN No. 45, the Company must continue to monitor the conditions that are subject to the
guarantees and indemnifications, as required under existing generally accepted accounting principles, to identify
if a loss has been incurred. If the Company determines that it is probable that a loss has been incurred, any such
estimable loss would be recognized. The initial recognition and measurement requirements do not apply to the
provisions contained in the majority of the Company’s software license agreements that indemnify licensees of
the Company’s software from damages and costs resulting from claims alleging that the Company’s software
infringes the intellectual property rights of a third party. The Company has not made payments pursuant to these
provisions. The Company has not identified any losses that are probable under these provisions and, accordingly,
the Company has not recorded a liability related to these indemnification provisions.
Purchase Obligations
The Company has agreements with suppliers to purchase inventory and estimates that its non-cancelable
obligations under these agreements for the fiscal year ended December 31, 2008 to be approximately $11.1
million.
Liabilities Related to Internal Revenue Code Section 409A
Because virtually all holders of stock options granted by the Company were not involved in or aware of the
incorrect pricing of certain options, the Company has taken and intends to take further actions to address certain
adverse tax consequences that may be incurred by the holders of such incorrectly priced options. The primary
adverse tax consequence is that the re-measured options vesting after December 31, 2004 subject the option
holder to a penalty tax under Section 409A of the IRC (and, as applicable, similar excise taxes under state laws).
As a result during 2007, the Company has recorded $3.4 million, net of income tax, in liabilities related to the
anticipated payment by the Company of payroll and excise taxes on behalf of the Company’s employees for
options that were exercised during open tax years under the related statutes.
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