Computer Associates 2007 Annual Report Download - page 101

Goodwill is not amortized into results of operations but instead is reviewed for impairment. During the fourth quarter of fiscal
year 2007, the Company performed its annual impairment review of goodwill and concluded that there was no impairment in
the current fiscal year. Similar impairment reviews were performed during the fourth quarter of fiscal years 2006 and 2005.
The Company concluded that there was no impairment to be recorded in these fiscal years.
The carrying value of goodwill was $5.35 billion and $5.31 billion as of March 31, 2007 and March 31, 2006, respectively.
During fiscal year 2007, goodwill increased by approximately $121 million as a result of fiscal year 2007 acquisitions, which
was partially offset by approximately $53 million of goodwill adjustments for prior year acquisitions. The goodwill adjustments
for the fiscal year 2007 primarily consisted of a $20 million favorable resolution to certain foreign tax credits that were
acquired and fully reserved that resulted from the conclusion of an Internal Revenue Service audit and approximately
$19 million related to other adjustments to deferred tax assets and liabilities associated with acquired businesses from prior
periods. Goodwill was also reduced by approximately $31 million due to the divesture of Benit. Refer to Note 2, “Acquisitions
and Divestitures,” for additional information relating to the Company’s sale of Benit.
The carrying value of goodwill was $5.31 billion and $4.54 billion as of March 31, 2006 and 2005, respectively. During fiscal
year 2006, goodwill increased approximately $764 million due primarily to the acquisitions of Concord, Niku, iLumin and Wily
of approximately $345 million, $226 million, $36 million and $232 million, respectively. Subsequent to the acquisition dates,
in fiscal year 2006, the goodwill balances for Concord and Niku were increased/(decreased) to revise the initial purchase price
allocation by approximately $12 million and ($83) million, respectively. Goodwill adjustments of approximately $7 million
were also recorded in connection with smaller acquisitions made during fiscal year 2006. Goodwill associated with
acquisitions prior to fiscal year 2006 were reduced by approximately $3 million. Goodwill was also reduced by $8 million
for the sale of MultiGen-Paradigm, Inc. Refer to Note 2 “Acquisitions and Divestitures,” for additional information relating to
the Company’s sale of MultiGen.
(p) Derivative Financial Instruments: Derivatives are accounted for in accordance with Statement of Financial Accounting
Standards No. 133, “Accounting for Derivative Instruments and Hedging Activities” (“SFAS No. 133”). Periodically, as part of the
Company’s on-going risk management program, the Company enters into derivative contracts with the intent of mitigating a
certain portion of the Company’s operating exposures, which could include its exposure to foreign currency denominated
monetary assets and liabilities. The Company did not apply hedge accounting treatment under SFAS No. 133 for these
exposures. Accordingly, all outstanding derivatives are recognized on the balance sheet at fair value and the changes in fair
value from these contracts are recorded as other gains or expenses, in the statement of operations.
During fiscal year 2007, the Company entered into derivative contracts with a total notional value of approximately 208 million
euros and 2.5 billion yen, of which 75 million euros were outstanding as of March 31, 2007. The derivative contracts that were
entered into during fiscal year 2007 resulted in a loss of approximately $3 million, of which $1 million related to unrealized
losses on outstanding derivative contracts as of March 31, 2007. These results are included in the “Other gains, net” line item
of the Consolidated Statement of Operations for the fiscal year ended March 31, 2007.The derivatives outstanding at the end
of March 31, 2007 matured in April 2007. In April and May 2007, the Company entered into similar derivative contracts as
those entered during the fiscal year 2007 relating to the Company’s operating exposures.
For the fiscal year ended March 31, 2006, the Company entered into derivative contracts with a total notional value of
280 million euros. Derivatives with a notional value of 80 million euros were entered into with the intent of mitigating a certain
portion of the Company’s euro operating exposure and were part of the Company’s on-going risk management program.
Derivatives with a notional value of 200 million euros were entered into during March 2006 with the intent of mitigating a
certain portion of the foreign exchange variability associated with the Company’s repatriation of approximately $584 million
from its foreign subsidiaries. Hedge accounting under SFAS No. 133 was not applied to any of the derivatives entered into
during the fiscal year ended March 31, 2006.The resulting gain of approximately $1 million for the fiscal year ending March 31,
2006 is included in the “Other gains, net” line in the Consolidated Statement of Operations. At March 31, 2006, there were no
derivative contracts outstanding.
(q) Stock Repurchase: During fiscal year 2007, the Company repurchased approximately 10 million shares of its common
stock for approximately $225 million prior to August 15, 2006 as part of the Company’s previously authorized $600 million
common stock repurchase plan. On August 15, 2006, the Company announced the commencement of a tender offer to
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