Computer Associates 2015 Annual Report Download - page 75

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 generally estimated to have 5 to 39 year lives, and the remaining property and equipment are generally
estimated to have 3 to 7 year lives.
Internally Developed Software Products: Internally developed software products, which are included in ‘‘Capitalized software
and other intangible assets, net’’ in the Consolidated Balance Sheets, consist of capitalized 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, as defined in FASB ASC Topic 985-20, has been established. Costs incurred thereafter are capitalized until the
product is made generally available. The stage during the Company’s development process for a new product or new release
at which technological feasibility requirements are established affects the amount of costs capitalized.
Annual amortization of internally developed software products 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, and such amortization is included in
‘‘Amortization of capitalized software costs’’ in the Consolidated Statements of Operations. Internally developed 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.
Purchased Software Products: Purchased software products, which is included in ‘‘Capitalized software and other intangible
assets, net’’ in the Consolidated Balance Sheets, consist primarily of 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. Annual amortization of purchased software products 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. The Company generally
amortizes capitalized software costs using the straight-line method over their remaining economic lives, estimated to be
between 2 and 10 years from the date of acquisition, and such amortization is included in ‘‘Amortization of capitalized
software costs’’ in the Consolidated Statements of Operations. 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, which is included in ‘‘Capitalized software and other intangible assets, net’’
in the Consolidated Balance Sheets, consist of customer relationships and trademarks/trade names. The Company generally
amortizes all other intangible assets using the straight-line method over their remaining economic lives, estimated to be
between 2 and 12 years from the date of acquisition, and such amortization is included in ‘‘Depreciation and amortization
of other intangible assets’’ in the Consolidated Statements of Operations. 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 purchase price over the fair value of net assets acquired in connection with
business combinations accounted for using the purchase method of accounting. Goodwill is not amortized, but instead
goodwill is required to be tested for impairment annually and under certain circumstances. The Company reviews goodwill
for impairment on an annual basis on the first day of the fourth quarter of each fiscal year, and on an interim basis
whenever events or changes in circumstances indicate that the carrying value may not be recoverable, at the reporting unit
level. The Company’s reporting units are the same as its operating segments.
When evaluating goodwill for impairment, based upon the Company’s annual test or due to changes in circumstances
described above, the Company first can opt to perform a qualitative assessment to determine if the fair value of a reporting
unit is more likely than not (i.e., a likelihood of more than 50 percent) less than the reporting unit’s carrying amount,
including goodwill, or it can directly perform the two-step impairment test. This qualitative assessment includes, among
other things, consideration of: (i) identifying inputs and assumptions that most affect fair value; (ii) identifying relevant
events and circumstances that may have an impact on those inputs and assumptions; (iii) weighing the events and
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