Computer Associates 2007 Annual Report Download - page 99

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Future minimum lease payments to be made under this non-cancelable operating lease as of March 31, 2007 are as follows:
FISCAL YEARS
(IN MILLIONS)
2008 $15
2009 15
2010 15
2011 16
2012 16
And thereafter 152
Total minimum lease payments $ 229
Total rent expense related to this lease arrangement during fiscal year 2007 was approximately $10 million.
Capitalized Software Costs and Other Identified Intangible Assets: Capitalized software costs include the fair value of rights to
market software products acquired in purchase business combinations (Purchased Software Products). In allocating the
purchase price to the assets acquired in a purchase business combination, the Company allocates a portion of the purchase
price equal to the fair value at the acquisition date of the rights to market the software products of the acquired company. The
purchase price of Purchased Software Products is capitalized and amortized over the estimated useful life of such products
over a period not exceeding eight years. In connection with the acquisition of Cybermation, Inc. (Cybermation), MDY Group
International, Inc. (MDY), XOsoft, Inc. (XOsoft), and Cendura Corporation (Cendura) the Company capitalized approximately
$9 million, $5 million, $9 million, and $21 million of purchased software, respectively.
In accordance with SFAS No. 86, “Accounting for the Costs of Computer Software to be Sold, Leased, or Otherwise Marketed,”
internally generated software development costs associated with new products and significant enhancements to existing
software products are expensed as incurred until technological feasibility has been established. Internally generated software
development costs of $85 million, $84 million, and $70 million were capitalized during fiscal years 2007, 2006, and 2005,
respectively. The Company recorded amortization of $54 million, $48 million, and $41 million for the fiscal years ended
March 31, 2007, 2006, and 2005, respectively, which was included in the “Amortization of capitalized software costs” line
item in the Consolidated Statements of Operations. Unamortized, internally generated software development costs included
in the “Other noncurrent assets” line item on the Consolidated Balance Sheets as of March 31, 2007 and 2006 were
$226 million and $195 million, respectively. Annual amortization of capitalized software costs is the greater of the amount
computed using the ratio that current gross revenues for a product bear to the total of current and anticipated future gross
revenues for that product or the straight-line method over the remaining estimated economic life of the software product,
generally estimated to be five years from the date the product became available for general release to customers. The
Company amortized capitalized software costs using the straight-line method in fiscal years 2007, 2006, and 2005, 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 Cybermation, MDY, and XOsoft in fiscal year 2007, the Company recognized
approximately $19 million, $3 million, and $7 million, respectively of customer relationships and trademarks/trade
names. In connection with the acquisition of Concord Communications, Inc. (Concord), Niku Corporation (Niku), iLumin
Software Services, Inc. (iLumin), and Wily Technology, Inc. (Wily) in fiscal year 2006, the Company recognized approximately
$22 million, $44 million, $21 million and $126 million, respectively of customer relationships and trademarks/trade names.
In accordance with SFAS No. 142, “Goodwill and Other Intangible Assets”, certain identified intangible assets with indefinite lives
are not subject to amortization. The Company periodically reviews its long lived assets and certain identifiable intangible
assets with indefinite lives for impairment annually or whenever events or changes in business circumstances indicate that the
carrying amount of the assets may not be fully recoverable or that the useful lives of these assets are no longer appropriate.
During the fourth quarter of fiscal year 2007, the Company recorded an impairment charge of approximately $12 million,
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