Citrix 2007 Annual Report Download - page 84

CITRIX SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Investments
Short-term and long-term investments at December 31, 2007 and 2006 primarily consist of corporate
securities, agency securities, municipal securities, commercial paper, and government securities. Investments
classified as available-for-sale are stated at fair value with unrealized gains and losses, net of taxes, reported in
accumulated other comprehensive income. Investments classified as held-to-maturity are stated at amortized cost.
In accordance with Statement of Financial Accounting Standards (“SFAS”) No. 95, Statement of Cash Flows, the
Company classifies available-for-sale securities, including its investments in auction rate securities that are
available to meet the Company’s current operational needs, as short-term. The Company does not recognize
changes in the fair value of its investments in income unless a decline in value is considered other-than-
temporary in accordance with the Financial Accounting Standards Board (the “FASB”) Staff Position 115-1, The
Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments.
The Company minimizes its credit risk associated with investments by investing primarily in investment
grade, highly liquid securities. The Company’s policy is designed to limit exposure to any one issuer depending
on credit quality. Periodic evaluations of the relative credit standing of those issuers are considered in the
Company’s investment strategy. The Company uses information provided by third parties to adjust the carrying
value of certain of its investments and derivative instruments to fair value at the end of each period. Fair values
are based on valuation models that use market quotes and, for certain investments, assumptions as to the
creditworthiness of the entities issuing those underlying instruments.
Accounts Receivable
The Company’s accounts receivable are due primarily from value-added resellers, distributors and end
customers. Collateral is not required. Product returns are provided for in the consolidated financial statements
and have historically been within management’s expectations. The Company also maintains allowances for
doubtful accounts for estimated losses resulting from the inability of the Company’s customers to make
payments. The Company periodically reviews these estimated allowances, including an analysis of the
customers’ payment history and creditworthiness. The allowance for doubtful accounts was $2.9 million and $2.4
million as of December 31, 2007 and 2006, respectively. If the financial condition of a significant distributor or
customer were to deteriorate, the Company’s operating results could be adversely affected. No distributor or
end-customer accounted for more than 10% of gross accounts receivable at December 31, 2007 or 2006.
Inventory
Inventories are stated at the lower of cost or market on a first-in, first out basis and primarily consist of
finished goods. As of December 31, 2007 and 2006, the provision to reduce obsolete or excess inventories to
market was $8.5 million and $5.2 million, respectively.
Property and Equipment
Property and equipment is stated at cost. Depreciation is computed using the straight-line method over the
estimated useful lives of the assets, which is generally three years for computer equipment, software, office
equipment and furniture, the lesser of the lease term or five years for leasehold improvements, which is the
estimated useful life, seven years for the Company’s enterprise resource planning system and 40 years for
buildings. Depreciation expense was $38.2 million, $27.4 million and $22.0 million for 2007, 2006 and 2005,
respectively.
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