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Table of Contents
EMC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Use of Accounting Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, the reported amounts of revenues and expenses during the reporting period and the
disclosure of contingent assets and liabilities at the date of the financial statements. Actual results could differ from those estimates.
Revenue Recognition
We derive revenue from sales of information systems, software and services. We recognize revenue when persuasive evidence of an arrangement exists,
delivery has occurred, the sales price is fixed or determinable and collectibility is reasonably assured. This policy is applicable to all sales, including sales to
resellers and end users. The following summarizes the major terms of our contractual relationships with our customers and the manner in which we account
for sales transactions.
•Systems sales
Systems sales consist of the sale of hardware, including Symmetrix systems, CLARiiON systems, NetWin and Celerra systems, Centera systems and
Connectrix systems. Revenue for hardware is generally recognized upon shipment.
•Software sales
Software sales consist of the sale of software application programs. Our software products provide customers with information management, content
management, sharing, protection and server virtualization capabilities. Revenue for software is generally recognized upon shipment or electronic delivery.
License revenue from royalty payments is recognized upon receipt of royalty reports from third party original equipment manufacturers ("OEMs").
•Services revenue
Services revenue consists of installation services, software maintenance, hardware maintenance, training and professional services.
Installation and professional services are not considered essential to the functionality of our products as these services do not alter the product capabilities
and may be performed by our customers or other vendors. Installation services revenues are recognized upon completion of installation.
Software and hardware maintenance revenues are recognized ratably over the contract period.
Training revenues are recognized upon completion of the training.
Professional services revenues, which include information infrastructure assessments and design, integration and implementation, business continuity, data
migration, networking storage and project management, are recognized as earned based upon the hours incurred.
•Multiple element arrangements
When more than one element such as hardware, software and services are contained in a single arrangement, we allocate revenue between the elements
based on each element's relative fair value, provided that each element meets the criteria for treatment as a separate unit of accounting. An item is considered
a separate unit of accounting if it has value to the customer on a standalone basis and there is objective and reliable evidence of the fair value of the
undelivered items. Fair value is generally 53