EMC 2005 Annual Report Download - page 49

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Table of Contents
EMC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. Summary of Significant Accounting Policies
Company
EMC Corporation and its subsidiaries develop and deliver open, flexible information infrastructures, offering a wide range of systems, software,
services and solutions that help organizations extract greater value from their information and get the most out of their IT assets.
EMC develops solutions for customers to manage information intelligently based on its changing value to an organization over time. With a strategy
known as information lifecycle management, we help individuals and organizations store, manage, protect, secure, move and share information to collaborate,
solve problems, save money, exploit new opportunities, comply with regulations and policies and improve operational results. Information lifecycle
management simultaneously lowers the cost and reduces the risk of managing information, no matter what format it is in – documents, images or e-mail – as
well as the data that resides in databases.
We also provide specialized virtual infrastructure and resource management software. Virtual infrastructure helps organizations respond to changing
IT requirements by dynamically altering their computing and storage environments with flexible virtualization technologies. Resource management allows
organizations to better understand, manage and automate the operation of their information infrastructure.
Accounting Principles
The financial statements and accompanying notes are prepared in accordance with accounting principles generally accepted in the United States of
America.
Principles of Consolidation
The consolidated financial statements include the accounts of EMC and its subsidiaries. All significant intercompany transactions and balances have
been eliminated.
Basis of Presentation
Certain reclassifications have been made to the prior years' financial statements to conform to the current year's presentation.
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 resource management, backup and
archiving, content management and server virtualization capabilities. Revenue for software is generally recognized upon shipment or electronic delivery.
License revenue from royalty payments is recognized upon either receipt of royalty reports or payments from third parties.
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