Computer Associates 2015 Annual Report Download - page 96

Note 17 — Segment and Geographic Information
In accordance with FASB ASC Topic 280, ‘‘Segment Reporting,’’ the Company disaggregates its operations into Mainframe
Solutions, Enterprise Solutions and Services segments, which is utilized by the Chief Operating Decision Maker, who is the
Company’s Chief Executive Officer, for evaluating segment performance and allocating resources.
The Company’s Mainframe Solutions and Enterprise Solutions segments comprise its software business organized by the
nature of the Company’s software offerings and the platform on which the products operate. The Services segment
comprises product implementation, consulting, customer education and customer training, including those directly related to
the Mainframe Solutions and Enterprise Solutions software that the Company sells to its customers.
The Company regularly enters 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 the Company applies to the customer contract
for purposes of preparing the Consolidated Financial Statements.
Segment expenses include costs that are controllable by segment managers (i.e., direct costs) and, in the case of the
Mainframe Solutions and Enterprise Solutions segments, an allocation of shared and indirect costs (i.e., allocated costs).
Segment-specific direct costs include a portion of selling and marketing costs, licensing and maintenance costs, product
development costs, general and administrative costs and amortization of the cost of internally developed software. Allocated
segment costs primarily include indirect and non-segment-specific direct selling and marketing costs and general and
administrative costs that are not directly attributable to a specific segment. The basis for allocating shared and indirect costs
between the Mainframe Solutions and Enterprise Solutions segments is dependent on the nature of the cost being allocated
and is either in proportion to segment revenues or in proportion to the related direct cost category. Expenses for the
Services segment consist of cost of professional services and other direct costs included within selling and marketing and
general and administrative expenses. There are no allocated or indirect costs for the Services segment.
Segment expenses do not include share-based compensation expense; amortization of purchased software; amortization of
other intangible assets; approved actions by the Company’s Board of Directors (i.e., costs associated with the Company’s
Fiscal 2014 Plan); and other miscellaneous costs. The Company considers all costs of internally developed software as
segment expense in the period the costs are incurred and as a result, the Company will add back capitalized internal
software costs and exclude amortization of internally developed software costs previously capitalized from segment expenses.
A measure of segment assets is not currently provided to the Company’s Chief Executive Officer and has therefore not
been disclosed.
As part of the Company’s efforts to more fully utilize its intellectual property assets, in fiscal year 2013, the Company closed
a transaction that assigned the rights to certain of these assets to a large technology company for approximately $35 million.
The entire contract amount is included in the Enterprise Solutions segment for the year ended March 31, 2013.
For fiscal year 2015, the Company incurred severance costs associated with the Fiscal 2015 Severance Actions, of which
$17 million, $15 million and $8 million were assigned to the Mainframe Solutions, Enterprise Solutions and Services
segments, respectively. For fiscal year 2013, the Company incurred severance costs, of which $3 million, $10 million and
$2 million were assigned to the Mainframe Solutions, Enterprise Solutions and Services segments, respectively. See Note 4,
‘‘Severance and Exit Costs,’’ for additional information.
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