Computer Associates 2007 Annual Report Download - page 63

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The following table summarizes our contractual arrangements at March 31, 2007 and the timing and effect that such
commitments are expected to have on our liquidity and cash flow in future periods. In addition, the table summarizes the
timing of payments on our debt obligations as reported on our Consolidated Balance Sheet as of March 31, 2007.
(IN MILLIONS) TOTAL
LESS THAN
1 YEAR
1–3
YEARS
3–5
YEARS
MORE THAN
5 YEARS
PAYMENTS DUE BY PERIOD
Contractual Obligations
Long-term debt obligations (inclusive of interest) 3,006 137 2,228 57 584
Operating lease obligations
1
783 133 194 132 324
Purchase obligations 117 77 32 8 —
Other long-term liabilities 136 39 47 26 24
Total 4,042 386 2,501 223 932
1 The contractual obligations for noncurrent operating leases include sublease income totaling $101 million expected to be received in the following periods: $30 million (less than 1 year); $43 million
(1–3 years); $17 million (3–5 years); and $11 million (more than 5 years).
As of March 31, 2007, we have no material capital lease obligations, either individually or in the aggregate.
Critical Accounting Policies and Estimates
We review our financial reporting and disclosure practices and accounting policies quarterly to help ensure that they provide
accurate and transparent information relative to the current economic and business environment. Note 1, “Significant
Accounting Policies”, in the Notes to the Consolidated Financial Statements contains a summary of the significant accounting
policies that we use. Many of these accounting policies involve complex situations and require a high degree of judgment,
either in the application and interpretation of existing accounting literature or in the development of estimates that impact our
financial statements. On an ongoing basis, we evaluate our estimates and judgments based on historical experience as well as
other factors that are believed to be reasonable under the circumstances. These estimates may change in the future if
underlying assumptions or factors change.
We consider the following significant accounting polices to be critical because of their complexity and the high degree of
judgment involved in implementing them.
Revenue Recognition
We generate revenue from the following primary sources: (1) licensing software products; (2) providing customer technical
support (referred to as maintenance); and (3) providing professional services, such as consulting and education.
We recognize revenue pursuant to the requirements of Statement of Position 97-2 “Software Revenue Recognition” (SOP 97-2),
issued by the American Institute of Certified Public Accountants, as amended by SOP 98-9 “Modification of SOP 97-2, Software
Revenue Recognition, With Respect to Certain Transactions.” In accordance with SOP 97-2, we begin to recognize revenue from
licensing and supporting our software products when all of the following criteria are met: (1) we have evidence of an
arrangement with a customer; (2) we deliver the products; (3) license agreement terms are deemed fixed or determinable and
free of contingencies or uncertainties that may alter the agreement such that it may not be complete and final; and
(4) collection is probable.
Our software licenses generally do not include acceptance provisions. An acceptance provision allows a customer to test the
software for a defined period of time before committing to license the software. If a license agreement includes an acceptance
provision, we do not record deferred subscription value or recognize revenue until the earlier of the receipt of a written
customer acceptance or, if not notified by the customer to cancel the license agreement, the expiration of the
acceptance period.
Under our business model, software license agreements typically include flexible contractual provisions that, among other
things, allow customers to receive unspecified future software products for no additional fee. These agreements combine the
right to use the software products with maintenance for the term of the agreement. Under these agreements, once all four of
the above noted revenue recognition criteria are met, we are required to recognize revenue ratably over the term of the license
agreement. For license agreements signed prior to October 2000 (the prior business model), once all four of the above noted
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