Computer Associates 2015 Annual Report Download - page 54

As described in Note 14, ‘‘Stock Plans,’’ in the Notes to the Consolidated Financial Statements, performance share units
(PSUs) are awards under the long-term incentive programs for senior executives where the number of shares or restricted
shares, as applicable, ultimately received by the senior executives depends on our performance measured against specified
targets and will be determined at the conclusion of the three-year or one-year period, as applicable. The fair value of each
award is estimated on the date that the performance targets are established based on the fair value of our stock and our
estimate of the level of achievement of our performance targets. We are required to recalculate the fair value of issued
PSUs each reporting period until the underlying shares are granted. The adjustment is based on the quoted market price of
our stock on the reporting period date. Each quarter, we compare the actual performance we expect to achieve with the
performance targets.
Fair Value of Financial Instruments
The measurement of fair value for our financial instruments is based on the authoritative guidance which establishes a fair
value hierarchy that is based on three levels of inputs and requires an entity to maximize the use of observable inputs and
minimize the use of unobservable inputs when measuring fair value. See Note 10, ‘‘Fair Value Measurements,’’ for
additional information.
We are exposed to financial market risks arising from changes in interest rates and foreign exchange rates. Changes in
interest rates could affect our monetary assets and liabilities, and foreign exchange rate changes could affect our foreign
currency denominated monetary assets and liabilities and forecasted transactions. We enter into derivative contracts with the
intent of mitigating a portion of these risks. See Note 9, ‘‘Derivatives,’’ for additional information.
Legal Contingencies
We are currently involved in various legal proceedings and claims. Periodically, we review the status of each significant
matter and assess our potential financial exposure. If the potential loss from any legal proceeding or claim is considered
probable and the amount can be reasonably estimated, we accrue a liability for the estimated loss. Significant judgment is
required in both the determination of the probability of a loss and the determination as to whether the amount of loss is
reasonably estimable. Due to the uncertainties related to these matters, the decision to record an accrual and the amount of
accruals recorded are based only on the information available at the time. As additional information becomes available, we
reassess the potential liability related to our pending litigation and claims, and may revise our estimates. Any revisions could
have a material effect on our results of operations. Refer to Note 11, ‘‘Commitments and Contingencies,’’ in the Notes to
the Consolidated Financial Statements for a description of our material legal proceedings.
New Accounting Pronouncements
In May 2014, the FASB issued Accounting Standards Update No. 2014-09 (ASU 2014-09), Revenue from Contracts with
Customers (Topic 606), which requires an entity to recognize the amount of revenue to which it expects to be entitled for
the transfer of promised goods or services to customers. ASU 2014-09 will replace most existing revenue recognition
guidance in U.S. GAAP when it becomes effective. In April 2015, the FASB proposed a one-year deferral of the effective
date of the new revenue recognition standard. If finalized as proposed, the new guidance will be effective for our first
quarter of fiscal 2019 and early application would be permitted. We are evaluating the effect that ASU 2014-09 will have on
our consolidated financial statements and related disclosures. ASU 2014-09 is expected to have a significant impact on our
revenue recognition policies and disclosures. We have not yet selected a transition method nor have we determined the
effect of the standard on our ongoing financial reporting.
In April 2015, the FASB issued ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs (Topic 835), which changes
the required presentation of debt issuance costs from an asset on the balance sheet to a deduction from the related debt
liability. This guidance will be effective for our first quarter of fiscal 2017. The adoption of this guidance is not expected to
have a material impact on our consolidated financial statements.
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