Computer Associates 2005 Annual Report Download - page 30

Table of Contents
This Annual Report on Form 10-K/A (Form 10-K/A) contains certain forward-looking information relating to Computer Associates
International, Inc. (the “Company,” “Registrant,” “CA,” “We,” “Our,” or “Us”) that is based on the beliefs of, and assumptions made by,
our management as well as information currently available to management. When used in this Form 10-K/A, the words “anticipate,”
“believe,” “estimate,” “expect,” and similar expressions are intended to identify forward-looking information. Such information
includes, for example, the statements made under the caption “Management’ s Discussion and Analysis of Financial Condition and
Results of Operations” under Item 7, but also appears in other parts of this Form 10-K/A. This forward-looking information reflects our
current views with respect to future events and is subject to certain risks, uncertainties, and assumptions, some of which are described
under “Management’ s Discussion and Analysis of Financial Condition and Results of Operations — Risk Factors” and elsewhere in this
Form 10-K/A. Should one or more of these risks or uncertainties occur, or should our assumptions prove incorrect, actual results may
vary materially from those described in this Form 10-K/A as anticipated, believed, estimated, or expected. We do not intend to update
these forward-looking statements.
The products and services mentioned in this Form 10-K/A are used for identification purposes only and may be protected by trademarks,
trade names, services marks and/or other intellectual property rights of the Company and/or other parties in the United States and/or
other jurisdictions. The absence of a specific attribution in connection with any such mark does not constitute a waiver of any such right.
This Form 10-K/A also contains references to other company, brand, and product names. These company, brand, and product names are
used herein for identification purposes only and may be the trademarks of their respective owners. We disclaim any responsibility for
specifying which marks are owned by which companies or which organizations.
EXPLANATORY NOTE
In our previously filed Form 10-K for the fiscal year ended March 31, 2005 (Original 2005 Form 10-K), we restated the consolidated
financial statements for the fiscal years ended March 31, 2004 and 2003 that were previously reported in our Annual Reports on Form
10-K for fiscal years 2004 and 2003, and we restated the consolidated condensed financial statements for the first three quarters of fiscal
year 2005 and 2004 that were previously reported in our quarterly reports on Form 10-Q, and the consolidated financial statements for
the fourth quarter of fiscal year 2004 that were reported in our Annual Report on Form 10-K, as filed with the Securities and Exchange
Commission (SEC).
In this Form 10-K/A, we are further restating the financial statements for each of the periods presented to reflect the modified
retrospective adoption of Statement of Financial Accounting Standards (SFAS) No. 123 (revised 2004), “Share-Based Payment” (SFAS
No. 123(R)) and to incorporate adjustments to restate revenue associated with an accounting error determined as a result of the
Company’ s review of its revenue recognition policies. Refer to paragraph “b” of Note 12, “Restatements” to the Consolidated Financial
Statements for additional information. We have also included under Item 6, “Selected Financial Data,” restated financial information for
the fiscal years ended March 31, 2005 through 2001, and, under Item 7, “Management’ s Discussion and Analysis of Financial Condition
and Results of Operations — Selected Quarterly Information,” restated quarterly financial information for the fiscal years ended
March 31, 2005 and 2004. Overall, this Form 10-K/A has not modified or updated other disclosures presented in the Original 2005
Form 10-K, except as required to reflect the items amended in the Form 10-K/A as described above. This Form 10-K/A is not
superseding or restating financial statements contained in the Company’ s quarterly report on Form 10-Q for the quarter ended June 30,
2005 or any current report on Form 8-K filed subsequent to March 31, 2005. However, the financial statements for the first quarter of the
2005 fiscal year, which are also contained in the Form 10-Q for the quarter ended June 30, 2005 for comparison purposes, have been
restated in the Amended Form 10-K/A (though not in the Form 10-Q for the quarter ended June 30, 2005). Accordingly, the information
in the Form 10-Q for the quarter ended June 30, 2005 should be considered in light of the information in the Amended Form 10-K/A.
As previously announced in a Current Report on Form 8-K filed with the SEC on May 26, 2005, we identified certain transactions that
we entered into in fiscal years 1998 through 2001 that were accounted for improperly. In a few instances, these transactions involved
contemporaneous purchases and sales (or investments and licenses) of software products and services with the same or related third
parties. These transactions appear not to have been negotiated on an arm’ s-length basis and to have no valid commercial purpose. In
several other cases, the terms of certain license agreements were altered by side agreements that would have prevented the full
recognition of related revenue until some future period. While we entered into all of these transactions in fiscal years 1998 through 2001,
the accounting treatment for these transactions required the initial deferral of revenue, and subsequent recognition of revenue in the
period the contract became fixed and determinable, and therefore has also affected the financial statements for each of the subsequent
fiscal years, including fiscal year 2005. These restatements are being made to eliminate the impact of these prior-period errors on
subsequent periods. Additionally, as previously disclosed in our quarterly report on Form 10-Q for the quarter ended June 30, 2004,
during the first quarter of fiscal year 2005, the Company recognized $13 million of revenue relating to certain prior business model
contracts which had reduced revenue in prior fiscal periods. Since we are restating current and prior fiscal periods to correct prior period
errors, we have determined that the $13 million of revenue recognized in the first quarter of fiscal 2005 should be reported in the
applicable periods to which it related. Accordingly, an adjustment is also being made to reduce revenue in the first quarter of fiscal 2005
by $13 million and to increase revenue by $6 million in fiscal 2004, $4 million in fiscal 2003, and $3 million in fiscal 2002. The effects
of these restatements are reflected in the financial statements and other financial data, including quarterly data, included in this Form
10-K/A. The restatements have no impact on cash flows provided by continuing operating activities. Refer to paragraph “a” of Note 12,
“Restatements,” to the Consolidated Financial Statements for additional information.
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