VMware 2007 Annual Report Download - page 69

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Table of Contents
VMWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Deferred revenue includes unearned maintenance fees, professional services fees and license fees.
Foreign Currency Translation
The U.S. dollar is the functional currency of VMware’s foreign subsidiaries. Gains and losses from foreign currency transactions are
included in other expense, net, and were not material in any period presented.
Cash and Cash Equivalents
Cash and cash equivalents include highly liquid investments with a maturity of 90 days or less at the time of purchase. Cash equivalents
consist of money market funds.
Under the terms of various agreements, VMware has restricted cash included in other current assets and other assets, net. The amounts
were not material in any period presented.
Allowance for Doubtful Accounts
VMware maintains an allowance for doubtful accounts for estimated probable losses on uncollectible accounts receivable. The allowance
is based upon the creditworthiness of VMware’s customers, historical experience, the age of the receivable and current market and economic
conditions. Uncollectible amounts are charged against the allowance account.
Property and Equipment, net
Property and equipment, net are recorded at cost. Depreciation commences upon placing the asset in service and is recognized on a
straight-line basis over the estimated useful lives of the assets, as follows:
Upon retirement or disposition, the asset cost and related accumulated depreciation are removed with any gain or loss recognized in the
income statement. Repair and maintenance costs that do not extend the economic life of the underlying assets are expensed as incurred.
Research and Development and Capitalized Software Development Costs
Costs incurred in the research and development of new software products are expensed as incurred until technological feasibility is
established. Technological feasibility is defined as the earlier of the completion of a detail program design or a working model. Such costs
include salaries and benefits, including stock-based compensation, consultants, facilities-related costs, equipment costs, and depreciation.
Software development costs incurred subsequent to establishing technological feasibility through the general release of the software products are
capitalized. Upon general release of the products, capitalized costs are amortized over periods ranging from 18 to 24 months, which represent the
products’ estimated useful lives.
Unamortized software development costs were $66.8 million and $46.5 million at December 31, 2007 and 2006, respectively, and are
included in other assets, net.
65
Buildings
39 years
Land improvements
15 years
Furniture and fixtures
5 years
Equipment
2 to 5 years
Leasehold improvements
Shorter of lease term or useful life