Computer Associates 2015 Annual Report Download - page 72

Notes to the Consolidated Financial Statements
Note 1 — Significant Accounting Policies
(a) Description of Business: CA, Inc. and subsidiaries (the Company) develops, markets, delivers and licenses software
products and services.
(b) Presentation of Financial Statements: The accompanying audited Consolidated Financial Statements of the Company have
been prepared in accordance with U.S. generally accepted accounting principles (GAAP), as defined in the Financial
Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 205. The preparation of financial
statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts
reported in the financial statements and accompanying notes. Although these estimates are based on management’s
knowledge of current events and actions it may undertake in the future, these estimates may ultimately differ from actual
results. Significant items subject to such estimates and assumptions include: (i) the useful lives and expected future cash
flows of long-lived assets, including capitalized software costs and other intangibles, (ii) allowances for doubtful accounts,
(iii) the valuation of derivatives, deferred tax assets and assets acquired in business combinations, (iv) share-based
compensation, (v) reserves for employee severance benefit obligations, (vi) income tax uncertainties, (vii) legal contingencies
and (viii) the fair value of the Company’s reporting units.
(c) Principles of Consolidation: The Consolidated Financial Statements include the accounts of the Company and its
majority-owned and controlled subsidiaries. Investments in affiliates owned 50% or less are accounted for by the equity
method. Intercompany balances and transactions have been eliminated in consolidation. Companies acquired during each
reporting period are reflected in the results of the Company effective from their respective dates of acquisition through the
end of the reporting period.
(d) Divestitures: In the second quarter of fiscal year 2015, the Company sold its CA arcserve data protection solution assets
(arcserve). In the fourth quarter of fiscal year 2014, the Company identified its CA ERwin Data Modeling solution assets
(ERwin) as available for sale. The results of operations associated with these businesses have been presented as
discontinued operations in the accompanying Consolidated Statements of Operations and Consolidated Statements of Cash
Flows for fiscal years 2015, 2014 and 2013. The effects of the discontinued operations were immaterial to the Company’s
Consolidated Balance Sheets at March 31, 2015 and 2014. See Note 3, ‘‘Divestitures,’’ for additional information.
(e) Foreign Currencies: In general, the functional currency of the Company’s foreign subsidiaries is the local country’s
currency. Assets and liabilities of the Company’s foreign subsidiaries are translated using the exchange rates in effect at the
balance sheet date. Results of operations are translated using average exchange rates. Adjustments arising from the
translation of the foreign currency financial statements of the Company’s subsidiaries into U.S. dollars are reported as
currency translation adjustments in ‘‘Accumulated other comprehensive loss’’ in the Consolidated Balance Sheets.
Foreign currency transaction (gains) losses were approximately $(14) million, $17 million and $12 million in fiscal years
2015, 2014 and 2013, respectively, and were included in ‘‘Other expenses (gains), net’’ in the Consolidated Statements of
Operations in the period in which they occurred. For fiscal years 2015 and 2014, other expenses (gains), net included
foreign currency transaction losses of approximately $14 million and $6 million, respectively, relating to the remeasurement
of monetary assets and liabilities of the Company’s Venezuelan subsidiary. These losses arose from the Company’s use of
the foreign currency exchange system in effect for Venezuela at March 31, 2015 and 2014, respectively.
(f) Revenue Recognition: The Company begins to recognize revenue from software licensing and maintenance when all of the
following criteria are met: (1) the Company has evidence of an arrangement with a customer; (2) the Company delivers the
specified products; (3) license agreement terms are fixed or determinable and free of contingencies or uncertainties that
may alter the agreement such that it may not be complete and final; and (4) collection is probable. Revenue is recorded net
of applicable sales taxes.
The Company’s software licenses generally do not include acceptance provisions. An acceptance provision allows a customer
to test the software for a defined period of time before committing to license the software. If a license agreement includes
an acceptance provision, the Company does not recognize revenue until the earlier of the receipt of a written customer
acceptance or when the acceptance right lapses. The Company’s standard licensing agreements include a product warranty
provision for all products. The likelihood that the Company will be required to make refunds to customers under such
provisions is considered remote.
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