Computer Associates 2012 Annual Report Download - page 73

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Notes to the Consolidated Financial Statements
Note 1 — Significant Accounting Policies
(a) Description of Business: CA, Inc. and subsidiaries (the Company) develops, markets, delivers and licenses software products and
services.
(b) Presentation of Financial Statements: The accompanying audited Consolidated Financial Statements of the Company have been
prepared in accordance with U.S. generally accepted accounting principles (GAAP), as defined in the Financial Accounting
Standards Board (FASB) Accounting Standards Codification (ASC) Topic 205. The preparation of financial statements in conformity
with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Although these estimates are based on management’s knowledge of current events and actions it may undertake
in the future, these estimates may ultimately differ from actual results. Significant items subject to such estimates and assumptions
include: (i) the useful lives of long-lived assets, (ii) allowances for doubtful accounts, (iii) the valuation of derivatives, goodwill,
deferred tax assets, assets acquired in business combinations and long-lived assets, (iv) share-based compensation, (v) reserves for
employee severance benefit obligations, (vi) income tax uncertainties, (vii) legal contingencies and (viii) the fair value of the
Company’s reporting units.
(c) Principles of Consolidation: The Consolidated Financial Statements include the accounts of the Company and its majority-owned
and controlled subsidiaries. Investments in affiliates owned 50% or less are accounted for by the equity method. Intercompany
balances and transactions have been eliminated in consolidation. Companies acquired during each reporting period are reflected in the
results of the Company effective from their respective dates of acquisition through the end of the reporting period. The purchase price
for each of the Company’s acquisitions is allocated to the assets acquired and liabilities assumed from the acquired entity. For
additional information, refer to Note 2, “Acquisitions.”
(d) Divestitures: In June 2011, the Company sold its Internet Security business and in June 2010, the Company sold its Information
Governance business. The results of operations associated with the sales of these businesses have been presented as discontinued
operations in the accompanying Consolidated Statements of Operations and Consolidated Statement of Cash Flows for fiscal years
2012, 2011 and 2010. The effects of the discontinued operations were immaterial to the Company’s Consolidated Balance Sheet at
March 31, 2011. See Note 3, “Discontinued Operations,” for additional information.
In September 2010, the Company recognized a gain of approximately $10 million from the sale of its interest in an investment
accounted for using the equity method. The gain is included in “Other expenses, net” in the Company’s Consolidated Statements of
Operations for fiscal year 2011.
(e) Foreign Currencies: Assets and liabilities of the Company’s international subsidiaries are translated using the exchange rates in
effect at the balance sheet date. Results of operations are translated using average exchange rates. Adjustments arising from the
translation of the foreign currency financial statements of the Company’s subsidiaries into U.S. dollars are reported as currency
translation adjustments in “Accumulated other comprehensive loss” in the Consolidated Balance Sheets.
Foreign currency transaction losses were approximately $4 million, $18 million and $10 million in fiscal years 2012, 2011 and 2010,
respectively, and are included in “Other expenses, net” in the Consolidated Statements of Operations in the period in which they
occurred.
(f) Revenue Recognition: The Company begins to recognize revenue from software licensing and maintenance when all of the
following criteria are met: (1) the Company has evidence of an arrangement with a customer; (2) the Company delivers the specified
products; (3) license agreement terms are 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. Revenue is recorded net of applicable sales
taxes.
The Company’s 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, the Company does not recognize revenue until the earlier of the receipt of a written customer acceptance or, if not notified
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