Computer Associates 2007 Annual Report Download - page 56

to enter into these types of financing arrangements remains at the customer’s discretion. Alternatively, we may decide to
transfer our rights and title to the future committed installment payments due under the license agreement to a third party
financial institution in exchange for a cash payment. In these instances, the license agreements signed by the customer
contain provisions that allow for the assignment of our financial interest without further customer involvement. Once
transferred, the future committed installments are payable by the customer to the third party financial institution. Whether the
future committed installments have been financed directly by the customer with our assistance or by the transfer of our rights
and title to future committed installments to a third party, the financing agreements may contain limited recourse provisions
with respect to our continued performance under the license agreements. Based on our historical experience, we believe that
any liability which may be incurred as a result of these limited recourse provisions will be immaterial.
Amounts received as a result of a single installment for the entire contract value, or a substantial portion of the contract value,
rather than being invoiced and collected over the life of the license agreement are reflected in the liability section of the
Consolidated Balance Sheet as either Deferred subscription revenue (collected) or Financing obligations (collected),
depending upon whether the cash is received directly from the customer or from a third party financial institution. The
aggregate balance of Deferred subscription revenue (collected), current and non-current, increased approximately
$329 million to $2.24 billion at March 31, 2007, while Financing obligations (collected), both current and non-current,
increased approximately $52 million to approximately $102 million as of March 31, 2007. As previously noted, collections of
these amounts positively impact current year cash flows provided from operating activities and collections that would have
been attributable to later years (i.e. the non-current portion) will not be available as a source of cash in such later years as the
revenue is recognized. We are unable to predict with certainty the amount of cash to be collected from single installments for
the entire contract value, or a substantial portion of the contract value, under new or renewed license agreements to be
executed in future periods.
For the fiscal year ended March 31, 2007 gross receipts related to single installments for the entire contract value, or a
substantial portion of the contract value, increased approximately $74 million from the comparable prior fiscal year to
approximately $577 million. Approximately $45 million of the increase was due to an increase in payments received from
customers, including instances where CA assisted with arranging third party financing. Additionally, cash receipts from the
transfer of our financial interest in committed payments to a third party financial institution increased approximately
$29 million from the prior comparable period to $89 million. This increase was primarily related to transactions completed in
the third quarter of fiscal year 2007. For the fiscal year ended March 31, 2007, two customers represented more than 10% of
the gross receipts from single installment payments as opposed to one customer in the prior fiscal year. Approximately
$7 million of installments representing the entire contract value or a substantial portion of the contract value billed in fiscal
year 2007 are expected to be collected in fiscal year 2008, as compared to approximately $90 million that had been billed in
fiscal year 2006 which was collected in fiscal year 2007.
In any quarter, we may receive payments in advance of the contractually committed date on which the payments were
otherwise due. In limited circumstances, we may offer discounts to customers to ensure payment in the current period of
invoices which are due, but which might not otherwise be paid until a subsequent period because of payment terms or other
factors. In the fourth quarter of fiscal year 2007, we received contractual payments of this type of approximately $2 million in
the aggregate, for which we granted an immaterial discount of less than 1% of the gross invoice.
Our estimate of the fair value of net installment accounts receivable recorded under the prior business model approximates
carrying value. Amounts due from customers under our business model are offset by deferred subscription value related to
these license agreements, leaving no or minimal net carrying value on the balance sheet for such amounts. The fair value of
such amounts may exceed this carrying value but cannot be practically assessed since there is no existing market for a pool of
customer receivables with contractual commitments similar to those owned by us. The actual fair value may not be known
until these amounts are sold, securitized or collected. Although these customer license agreements commit the customer to
payment under a fixed schedule, the agreements are considered executory in nature due to the ongoing commitment to
provide unspecified future products as part of the agreement terms.
We can estimate the total amounts to be billed or collected at the conclusion of a reporting period. Amounts we expect to bill
within the next twelve months at March 31, 2007 decreased by approximately $263 million to approximately $1.67 billion
from the end of the prior fiscal year. Amounts we expect to bill beyond the next 12 months decreased by approximately
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