Computer Associates 2012 Annual Report Download - page 75

Compensation Committee), which has discretion to reduce any award for any reason. The value of the PSU awards is remeasured
each reporting period until the Compensation Committee approves attainment of the specified performance targets, at which time a
grant date is deemed to have been achieved for accounting purposes, the value of the award is fixed and any remaining unrecognized
compensation expense is recognized over the remaining time-based vesting period. See Note 15, “Stock Plans,” for additional
information.
(i) Net Income Per Common Share: Unvested share-based payment awards that contain non-forfeitable rights to dividends or
dividend equivalents (whether paid or unpaid) are participating securities and are included in the computation of net income per share
under the two-class method. Under the two-class method, net income is reduced by the amount of dividends declared in the period for
each class of common stock and participating securities. The remaining undistributed income is then allocated to common stock and
participating securities as if all of the net income for the period had been distributed. Basic net income per common share excludes
dilution and is calculated by dividing net income allocable to common shares by the weighted average number of common shares
outstanding for the period. Diluted net income per common share is calculated by dividing net income allocable to common shares by
the weighted average number of common shares outstanding at the balance sheet date, as adjusted for the potential dilutive effect of
non-participating share-based awards and convertible notes. See Note 14, “Income from Continuing Operations Per Common Share,”
for additional information.
(j) Concentration of Credit Risk: Financial instruments that potentially subject the Company to concentration of credit risk consist
primarily of cash equivalents, derivatives and accounts receivable. The Company historically has not experienced any losses in its
cash and cash equivalent portfolios.
Amounts included in accounts receivable expected to be collected from customers, as disclosed in Note 6, “Trade Accounts
Receivable,” have limited exposure to concentration of credit risk due to the diverse customer base and geographic areas covered by
operations.
(k) Cash and Cash Equivalents: All financial instruments purchased with an original maturity of three months or less at the time of
purchase are considered cash equivalents. The Company’s cash and cash equivalents are held by its subsidiaries throughout the
world, frequently in each subsidiary’s respective functional currency which may not be the U.S. dollar. Approximately 64% and 47%
of cash and cash equivalents were maintained outside the United States at March 31, 2012 and 2011, respectively.
Total interest income, which primarily relates to the Company’s cash and cash equivalent balances and marketable securities, for
fiscal years 2012, 2011 and 2010 was approximately $30 million, $24 million and $26 million, respectively, and is included in
“Interest expense, net” in the Consolidated Statements of Operations.
(l) Marketable Securities: All marketable securities are classified as available-for-sale securities and are recorded at fair value.
Unrealized holding gains and losses, net of the related tax effect, are excluded from earnings and are reported as a separate
component of accumulated other comprehensive income until realized. Premiums and discounts on debt securities recorded at the
date of purchase are recognized in “Interest expense, net” using the effective interest method. Realized gains and losses on sales of all
such investments are reported in “Interest expense, net” and are computed using the specific identification cost method.
For marketable securities in an unrealized loss position, the Company is required to assess whether it intends to sell the security or
will more likely than not be required to sell the security before the recovery of its amortized cost basis less any current-period credit
loss. If either of these conditions is met, an other-than-temporary impairment on the security is recognized in “Interest expense, net”
equal to the difference between its fair value and amortized cost basis. See Note 5, “Marketable Securities,” for additional
information.
(m) Fair Value Measurements: Fair value is the price that would be received for an asset or the amount paid to transfer a liability in
an orderly transaction between market participants. The Company is required to classify certain assets and liabilities based on the
following fair value hierarchy:
— Level 1: Quoted prices in active markets that are unadjusted and accessible at the measurement date for identical, unrestricted
assets or liabilities;
— Level 2: Quoted prices for identical assets and liabilities in markets that are not active, quoted prices for similar assets and
liabilities in active markets or financial instruments for which significant inputs are observable, either directly or indirectly; and
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