Computer Associates 2015 Annual Report Download - page 38

The increase in amortization of capitalized software costs for fiscal 2015 compared with fiscal 2014 was primarily due to
impairments recorded during fiscal 2015 of $21 million relating to capitalized software (see Note 6, ‘‘Long Lived Assets,’’ in
the Notes to the Consolidated Financial Statements for additional information) which was offset by a decrease in
amortization expense from capitalized software costs that became fully amortized in recent periods.
Our product offerings and go-to-market strategy continue to evolve to include solutions and product suites that may be
delivered either on-premise or via SaaS or cloud platforms. We expect our product offerings to continue to become
available to customers at more frequent intervals than our historical release cycles. Over the last few years, we have also
adopted the Agile development methodologies, which are characterized by a more dynamic development process with more
frequent revisions to a product release’s features and functions as the software is being developed. Due to these factors, we
have commenced capitalization much later in the development life cycle. As a result, product development and
enhancements expenses have increased as the amount capitalized for internally developed software costs has decreased. We
no longer capitalize any significant amounts of internally developed software costs and, as a result, future amortization of
capitalized software costs is expected to decrease.
The decrease in amortization of capitalized software costs for fiscal 2014 compared with fiscal 2013 was primarily due to an
impairment recorded in the fourth quarter of fiscal 2013 of $55 million relating to purchased software (see Note 6, ‘‘Long
Lived Assets,’’ in the Notes to the Consolidated Financial Statements for additional information), partially offset by an
increase in software development projects that have reached general availability in recent periods and amortization from
assets acquired from recent acquisitions.
Selling and Marketing
Selling and marketing expenses include the costs relating to our sales force, channel partners, corporate and business
marketing and customer training programs. For fiscal 2015, the decrease in selling and marketing expenses compared with
fiscal 2014 was primarily attributable to a favorable foreign exchange effect of $15 million, a decrease in commissions
expense of $13 million due to lower new sales during fiscal 2015, a decrease in personnel related costs of $12 million from a
reduced head count as a result of the Fiscal 2014 Plan and a decrease in external consultants costs of $9 million. These
decreases were partially offset by $10 million in severance costs during the fourth quarter of fiscal 2015.
For fiscal 2014, the decrease in selling and marketing expenses compared with fiscal 2013 was primarily attributable to a
decrease in personnel-related costs of $147 million due to a reduced headcount as a result of the Fiscal 2014 Plan and prior
year workforce reduction actions, as well as a decrease in commission expense due to lower new sales during fiscal 2014.
These decreases were partially offset by a $48 million increase in our marketing initiatives for fiscal 2014 compared with
fiscal 2013.
General and Administrative
General and administrative expenses include the costs of corporate and support functions, including our executive leadership
and administration groups, finance, legal, human resources, corporate communications and other costs such as provisions for
doubtful accounts.
For fiscal 2015, general and administrative expenses decreased compared with fiscal 2014, primarily due to lower personnel-
related expenses and a favorable foreign exchange effect of $9 million. These decreases were partially offset by $5 million in
severance costs during the fourth quarter of fiscal 2015.
For fiscal 2014, general and administrative expenses decreased compared with fiscal 2013, primarily due to a favorable
foreign exchange effect of $7 million.
Product Development and Enhancements
For fiscal 2015 and fiscal 2014, product development and enhancements expenses represented 14% and 13% of total
revenue, respectively. The increase in product development and enhancements expenses was attributable to the decrease in
capitalized software development costs of approximately $33 million (see ‘‘Amortization of Capitalized Software Costs’’
above), partially offset by a decrease in personnel-related costs from a reduced headcount as a result of the Fiscal 2014
Plan. The decrease in personnel-related costs was partially offset by $16 million in severance costs during the fourth quarter
of fiscal 2015.
For fiscal 2014 and fiscal 2013, product development and enhancements expenses represented 13% and 11% of total
revenue, respectively. The increase in product development and enhancements expenses was attributable to the decrease in
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