Computer Associates 2005 Annual Report Download - page 113

Table of Contents
Note 1 — Significant Accounting Policies (Continued)
be five years. The Company amortized capitalized software costs using the straight-line method in fiscal years 2005, 2004, and 2003, as
anticipated future revenue is projected to increase for several years considering the Company is continuously integrating current
software technology into new software products.
Other identified intangible assets include both customer relationships and trademarks/trade names. In connection with the acquisition of
Netegrity in fiscal year 2005, the Company recognized approximately $45 million and $26 million of customer relationships and
trademarks/trade names, respectively.
In accordance with SFAS No. 142, certain identified intangible assets with indefinite lives are not subject to amortization. The balance
of such assets at March 31, 2005 was $26 million. The Company amortizes all other identified intangible assets over their remaining
economic life, estimated to be between six and twelve years. The Company recorded amortization of other identified intangible assets of
$40 million in the fiscal year ended March 31, 2005 and $39 million in each of the fiscal years ended March 31, 2004 and 2003. The net
carrying value of other identified intangible assets as of March 31, 2005 and 2004 was $226 million and $195 million, respectively, and
was included in the “Other noncurrent assets” line item on the Consolidated Balance Sheets.
Based on the identified intangible assets recorded through March 31, 2005, the annual amortization expense over the next five fiscal
years is expected to be as follows:
Year Ended March 31,
2006 2007 2008 2009 2010
(in millions)
Capitalized software:
Purchased $ 389 $ 274 $ 25 $ 20 $ 10
Internally developed 47 42 32 24 16
Other identified intangible assets subject to
amortization 43 27 27 27 27
Total $479 $343 $84 $ 71 $53
Accounting for Long-Lived Assets: The carrying values of purchased software products, other intangible assets, and other long-lived
assets, including investments, are reviewed on a regular basis for the existence of facts or circumstances, both internally and externally,
that may suggest impairment. If an impairment is determined to exist, any related impairment loss is calculated based on net realizable
value for capitalized software and fair value for all other intangibles.
Accounting for Stock-Based Compensation: Effective April 1, 2005, the Company adopted the provisions of Statement of Financial
Accounting Standards (SFAS) No. 123 (revised 2004), “Share-Based Payment” (SFAS No. 123(R)), which establishes accounting for
stock-based awards exchanged for employee services. Under the provisions of SFAS No. 123(R), stock-based compensation cost is
measured at the grant date, based on the calculated fair value of the award, and is recognized as an expense over the employee requisite
service period (generally the vesting period of the equity grant). The Company previously applied Accounting Principles Board
(APB) Opinion No. 25, “Accounting for Stock Issued to Employees,” and related interpretations for share-based awards granted prior to
April 1, 2003 and SFAS No. 123, “Accounting for Stock-Based Compensation,” for share-based awards granted after April 1, 2003 and
in each case provided the required pro forma disclosures of SFAS No. 123. The Company elected to adopt the modified retrospective
application method as provided by SFAS No. 123(R) and accordingly, the consolidated financial statements and related footnotes in this
Form 10-K/A have been restated to reflect the fair value method of expensing stock-based compensation on a basis consistent with the
pro forma disclosures required for those periods by SFAS No. 123, as amended. Refer to Note 9, “Stock Plans” for additional
information. Also, additional Notes were updated as applicable, for the Company’ s adoption of SFAS No. 123(R).
Sales Commissions: Sales commissions are expensed in the period earned by employees, which is typically upon the signing of a
contract.
Comprehensive Income (Loss): Comprehensive income (loss) includes net income (loss), foreign currency translation adjustments and
unrealized gains (losses) on the Company’ s available-for-sale securities. As of March 31, 2005 and 2004, the accumulated
comprehensive loss included a foreign currency translation loss of $75 million and $111 million, respectively. Accumulated
comprehensive loss also includes an unrealized loss on equity securities, net of tax, of less than $1 million as of March 31, 2005 and an
unrealized gain on equity securities, net of tax, of $8 million, as of March 31, 2004. The components of comprehensive income (loss),
net of applicable tax, for the fiscal years ended March 31, 2005, 2004, and 2003, are included within the Consolidated Statements of
Stockholders’ Equity.
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