Computer Associates 2015 Annual Report Download - page 40

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The reduction in the effective tax rate for fiscal 2014, compared with fiscal 2013, resulted primarily from favorable
resolutions of uncertain tax positions relating to U.S. and non-U.S. jurisdictions (including the completion of the
examination of our U.S. federal income tax returns for the tax years ended March 31, 2005, 2006 and 2007). These items
taken together resulted in a net benefit of $168 million for fiscal 2014.
No provision has been made for U.S. federal income taxes on $2,759 million and $2,349 million at March 31, 2015 and
2014, 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 November 2013, we received a tax assessment of Brazilian reais 211 million (which translated to $66 million at March 31,
2015), including interest and penalties, from the Brazilian tax authority relating to fiscal 2008-2013. The assessment included
a report of findings in connection with the examination. We disagree with the proposed adjustments in the assessment and
intend to vigorously dispute these matters through applicable administrative and judicial procedures, as appropriate. While
we believe that we will ultimately prevail, if the assessment is not resolved in our favor, it would have an impact on our
consolidated financial position, cash flows and results of operations.
We do not believe it is reasonably possible that the amount of unrecognized tax benefits will significantly increase or
decrease within the next 12 months.
Refer to Note 15, ‘‘Income Taxes,’’ in the Notes to the Consolidated Financial Statements for additional information.
Discontinued Operations
During fiscal 2015, we sold arcserve for $170 million and recognized a gain on disposal of $20 million, including tax expense
of $77 million. The effective tax rate on the disposal was unfavorably affected by non-deductible goodwill of $109 million. In
fiscal 2014, we identified ERwin as available for sale. The divestiture of arcserve and the planned divestiture of ERwin
result from an effort to rationalize our product portfolio within the Enterprise Solutions segment. The results of these
business operations are presented in income from discontinued operations for all periods.
Refer to Note 3, ‘‘Divestitures,’’ in the Notes to the Consolidated Financial Statements for additional information.
Performance of Segments
In accordance with FASB ASC Topic 280, ‘‘Segment Reporting,’’ we disaggregate our operations into Mainframe Solutions,
Enterprise Solutions and Services segments, which are utilized by our Chief Operating Decision Maker, who is our Chief
Executive Officer, for evaluating segment performance and allocating resources.
Our Mainframe Solutions and Enterprise Solutions segments comprise our software business organized by the nature of our
software offerings and the platform on which the products operate. The Mainframe Solutions segment products help
customers and partners transform mainframe management, gain more value from existing technology and extend mainframe
capabilities. Our Enterprise Solutions segment consists of various product offerings, including: DevOps, which helps
customers unite application development and IT operations; Management Cloud, where we help customers optimize IT
investments; and Security, which consists of identity and access management. The Services segment comprises product
implementation, consulting, customer education and customer training. These services include those directly related to our
mainframe solutions and enterprise solutions.
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 operating 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 products); (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 operating 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.
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