Citrix 2007 Annual Report Download - page 88

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CITRIX SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
and paper license arrangements, the Company typically requires a purchase order from the distributor,
reseller or end-user (depending on the arrangement) and an executed product license agreement from
the end-user. For technical support, product training and consulting services, the Company requires a
purchase order and an executed agreement. For online services, the Company requires the customer or
the reseller to electronically accept the terms of an online services agreement or execute a contract.
Delivery has occurred and the Company has no remaining obligations. For product license and
appliance sales, the Company’s standard delivery method is free-on-board shipping point.
Consequently, it considers delivery of packaged products and appliances to have occurred when the
products are shipped pursuant to an agreement and purchase order. The Company considers delivery of
licenses under electronic licensing agreements to have occurred when the related products are shipped
and the end-user has been electronically provided the software activation keys that allow the end-user
to take immediate possession of the product. For online services, delivery begins when the login id and
password have been provided to the customer. For product training and consulting services, the
Company fulfills its obligation when the services are performed. For license updates, technical support
and online services, the Company assumes that its obligation is satisfied ratably over the respective
terms of the agreements, which are typically 12 to 24 months.
The fee is fixed or determinable. In the normal course of business, the Company does not provide
customers the right to a refund of any portion of their license fees or extended payment terms. The
Company sells license updates and services, which includes technical support, product training and
consulting services separately and it determines vendor specific objective evidence (“VSOE”) of fair
value by the price charged for each of these items when sold separately or based on applicable renewal
rates. For online services, the fee is considered fixed or determinable if it is not subject to refund or
adjustment.
Collectability is probable. The Company determines collectability on a customer-by-customer basis
and generally does not require collateral. The Company typically sells product licenses and license
updates to distributors or resellers for whom there are histories of successful collection. New customers
are subject to a credit review process that evaluates their financial position and ultimately their ability
to pay. Customers are also subject to an ongoing credit review process. If the Company determines
from the outset of an arrangement that collectability is not probable, revenue recognition is deferred
until customer payment is received and the other parameters of revenue recognition described above
have been achieved. Management’s judgment is required in assessing the probability of collection,
which is generally based on evaluation of customer specific information, historical experience and
economic market conditions.
Net revenues include the following categories: Product Licenses, License Updates, Online Services and
Technical Services. Product Licenses primarily represent fees related to the licensing of the Company’s software
and appliance products. These revenues are reflected net of sales allowances, cooperative advertising agreements
and provisions for stock balancing return rights. License Updates consist of fees related to the Subscription
Advantage program that are recognized ratably over the term of the contract, which is typically 12-24 months.
Subscription Advantage is a renewable program that provides subscribers with immediate access to software
upgrades, enhancements and maintenance releases when and if they become available during the term of the
contract. Online Services revenues consist primarily of fees related to online service agreements and are
recognized ratably over the contract term. Technical Services revenues are comprised of fees from technical
support services which are recognized ratably over the contract term as well as revenues from product training
and certification, and consulting services revenue related to implementation of the Company’s products, which is
recognized as the services are provided.
F-14