Computer Associates 2012 Annual Report Download - page 43

U.S. Research and Development Tax Credit in December 2010, partially offset by refinements of tax positions taken in prior periods.
These items taken together resulted in a net benefit of $33 million for fiscal 2011.
The reduction in the effective tax rate for fiscal 2010, compared with fiscal 2009, resulted primarily from the net charge incurred in
fiscal 2009 that did not reoccur in fiscal 2010, in addition to fiscal 2010 reconciliations of tax returns to tax provisions, resolutions of
uncertain tax positions relating to non-U.S. jurisdictions and refinements of estimates ascribed to tax positions taken in prior periods
relating to our international tax profile. These items taken together resulted in a net benefit of $10 million for fiscal 2010.
No provision has been made for U.S. federal income taxes on $1,999 million and $1,719 million at March 31, 2012 and 2011,
respectively, of unremitted earnings of our foreign subsidiaries since we plan to permanently reinvest all such earnings outside the
United States. It is not practicable to determine the amount of tax associated with such unremitted earnings.
In April 2011, the U.S. Internal Revenue Service (IRS) completed its examination of our U.S. federal income tax returns for fiscal
2005, 2006 and 2007 and issued a report of its findings in connection with the examination. We disagree with certain proposed
adjustments in the report and are vigorously disputing these matters through the IRS appellate process. While we believe that the
recorded reserves are sufficient to cover exposures related to these issues, such that the ultimate disposition of this matter will not
have a material adverse effect on our consolidated financial position or results of operations, the resolution of this matter involves
uncertainties and the ultimate resolution could differ from the amounts recorded. The IRS is also examining our U.S. federal income
tax returns for fiscal 2008, 2009 and 2010.
Refer to Note 16, “Income Taxes,” in the Notes to the Consolidated Financial Statements for additional information.
Discontinued Operations
In the first quarter of fiscal 2012, we sold our Internet Security business for $14 million. In the first quarter of fiscal 2011, we sold
our Information Governance business, consisting primarily of the CA Records Manager and CA Message Manager software offerings
and related professional services, for $19 million.
The results of discontinued operations for fiscal 2012, 2011 and 2010 included revenue of $15 million, $83 million and $126 million,
respectively, and income from operations, net of taxes, of $13 million, $4 million and $12 million, respectively.
Refer to Note 3, “Discontinued Operations,” in the Notes to the Consolidated Financial Statements for additional information.
Performance of Segments
In the first quarter of fiscal 2012, we changed the internal reporting used by our Chief Executive Officer for evaluating segment
performance and allocating resources. The new reporting disaggregates our operations into Mainframe Solutions, Enterprise
Solutions and Services segments.
Our Mainframe Solutions and Enterprise Solutions operating segments comprise our software business organized by the nature of our
software offerings and the product hierarchy in which the platform operates. Our mainframe solutions, including Mainframe 2.0, help
customers and partners simplify mainframe management, gain more value from existing technology and extend mainframe
capabilities. Our enterprise solutions consists of various product offerings, including service assurance, security (identity and access
management), service and portfolio management and virtualization and service automation, SaaS, and cloud offerings. These
offerings are providing us with additional access to Growth Markets, which we define as companies with annual revenue between
$300 million and $2 billion. Our Services segment comprises implementation, consulting, education and training services, including
those directly related to the mainframe solutions and enterprise solutions software that we sell to our customers.
We regularly enter into a single arrangement with a customer that includes mainframe solutions, enterprise solutions and services.
The amount of contract revenue assigned to segments is generally based on the manner in which the proposal is made to the
customer. The software product revenue is assigned to the Mainframe Solutions and Enterprise Solutions segments based on either:
(1) a list price allocation method (which allocates a discount in the total contract price to the individual products in proportion to the
list price of the product); (2) allocations included within internal contract approval documents; or (3) the value for individual software
products as stated in the customer contract. The price for the implementation, consulting, education and training services is separately
stated in the contract and these amounts of contract revenue are assigned to the Services segment. The contract value assigned to each
segment is then recognized in a manner consistent with the revenue recognition policies we apply to the customer contract for
purposes of preparing our Consolidated Financial Statements.
Segment expenses include costs that are controllable by segment managers (i.e., direct costs) and, in the case of the Mainframe
Solutions and Enterprise Solutions segments, an allocation of shared and indirect costs (i.e., allocated costs). Segment-specific direct
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