Computer Associates 2012 Annual Report Download - page 76

— Level 3: Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.
See Note 11, “Fair Value Measurements,” for additional information.
(n) Long-Lived Assets:
Impairment of Long-Lived Assets, Excluding Goodwill and Other Intangibles: Long-lived assets are reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If circumstances
require a long-lived asset or asset group be tested for possible impairment, the Company first compares undiscounted cash flows
expected to be generated by that asset or asset group to its carrying value. If the carrying value of the long-lived asset or asset group
is not recoverable on an undiscounted cash flow basis, an impairment is recognized to the extent that the carrying value exceeds its
fair value. Fair value is determined through various valuation techniques including discounted cash flow models, quoted market
values and third-party independent appraisals, as considered necessary.
Property and Equipment: Property and equipment are stated at cost. Depreciation and amortization expense is calculated based on the
estimated useful lives of the assets, and is recognized by using the straight-line method. Building and improvements are estimated to
have 5 to 40 year lives, and the remaining property and equipment are estimated to have 3 to 7 year lives.
Capitalized Development Costs: Capitalized development costs in the accompanying Consolidated Balance Sheets include costs
associated with the development of computer software to be sold, leased or otherwise marketed. Software development costs
associated with new products and significant enhancements to existing software products are expensed as incurred until technological
feasibility has been established. Costs incurred thereafter are capitalized until the product is made generally available. 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 5 years from the date the product became
available for general release to customers. The Company generally recognizes amortization expense for capitalized software costs
using the straight-line method.
Purchased Software Products: Purchased software products primarily include the cost of software technology acquired in business
combinations. The cost of such products is equal to the fair value of the acquired software technology at the acquisition date. The
Company records straight-line amortization of purchased software costs over their remaining economic lives, estimated to be between
3 and 10 years from the date of acquisition. Purchased software products are reviewed for impairment quarterly and whenever events
or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
Other Intangible Assets: Other intangible assets include both customer relationships and trademarks/trade names. The Company
amortizes all other intangible assets over their remaining economic lives, estimated to be between 2 and 12 years from the date of
acquisition. Other intangible assets subject to amortization are reviewed for impairment quarterly and whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be recoverable.
Goodwill: Goodwill represents the excess of the aggregate purchase price over the fair value of the net tangible and intangible assets,
including in-process research and development, acquired by the Company in a purchase business combination. Goodwill is not
amortized into results of operations but instead is reviewed for impairment.
The Company adopted the Accounting Standards Update No. 2011-08, Intangibles — Goodwill and Other (Topic 350) — Testing
Goodwill for Impairment (ASU 2011-08) during the fourth quarter of fiscal year 2012. The implementation of this accounting
guidance did not have a material impact on the Company’s goodwill impairment evaluations.
In the first quarter of fiscal year 2012, the Company changed the internal reporting used by its Chief Executive Officer for evaluating
segment performance and allocating resources. The new reporting disaggregates the Company’s operations into Mainframe Solutions,
Enterprise Solutions and Services segments, and represented a change in the Company’s operating segments under ASC 280,
“Segment Reporting.” As a result of this change, the Company was required to allocate its goodwill based on the new reporting
structure and test goodwill for impairment at the reporting unit level, which would be the operating segment or one level below an
operating segment.
64