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TableofContents
VMware, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
2014thetotalamountofVMware’srestrictedcashwas$19millionand$95million,respectively.AsofDecember31,2014,$75millionoftherestrictedcash
balancerelatedtotheacquisitionofAirWatchLLC("AirWatch"),whichwasreleasedandpaidtocertainemployeesofAirWatchduring2015.RefertoNoteBfor
furtherinformation.
AsofDecember31,2015,VMware’stotalcash,cashequivalentsandshort-terminvestmentswere$7,509million,ofwhich$5,810millionwasheldoutside
theU.S.
Allowance for Doubtful Accounts
VMwaremaintainsanallowancefordoubtfulaccountsforestimatedlossesonuncollectibleaccountsreceivable.Theallowancefordoubtfulaccounts
considerssuchfactorsascreditworthinessofVMware’scustomers,historicalexperience,theageofthereceivable,andcurrenteconomicconditions.
Property and Equipment, Net
Propertyandequipment,netisrecordedatcost.Depreciationcommencesuponplacingtheassetinserviceandisrecognizedonastraight-linebasisoverthe
estimatedusefullifeoftheassets,asfollows:
Buildings
Termofunderlyinglandlease
Landimprovements
15years
Furnitureandfixtures
7years
Equipment
3to6years
Software
3years
Leaseholdimprovements
20years,nottoexceedthetermoftheunderlyinglease
Uponretirementordisposition,theassetcostandrelatedaccumulateddepreciationareremovedwithanygainorlossrecognizedontheconsolidated
statementsofincome.Repairandmaintenancecoststhatdonotextendtheeconomiclifeoftheunderlyingassetsareexpensedasincurred.
Internal-Use Software Development Costs
Costsassociatedwithinternal-usesoftwaresystemsduringtheapplicationdevelopmentstagearecapitalized.Capitalizationofcostsbeginswhenthe
preliminaryprojectstageiscompleted,managementhascommittedtofundingtheproject,anditisprobablethattheprojectwillbecompletedandthesoftware
willbeusedtoperformthefunctionintended.Capitalizationceasesatthepointwhentheprojectissubstantiallycompleteandisreadyforitsintendedpurpose.
Thecapitalizedamountsareincludedinpropertyandequipment,netontheconsolidatedbalancesheets.
Research and Development and Capitalized Software Development Costs
ResearchanddevelopmentcostsprimarilyconsistofpersonnelandrelatedoverheadcostsassociatedwiththeresearchanddevelopmentofVMware’sproduct
softwareandserviceofferingsandareexpensedasincurred.Developmentcostsofsoftwaretobesold,leased,orotherwisemarketedaresubjecttocapitalization
beginningwhentechnologicalfeasibilityfortheproducthasbeenestablishedandendingwhentheproductisavailableforgeneralrelease.Followingachangein
VMware’sgo-to-marketstrategyinlate2011,thelengthoftimebetweenachievingtechnologicalfeasibilityandgeneralreleasetocustomerssignificantly
decreased.Duringtheyearspresented,softwaredevelopmentcostsincurredforproductsduringthetimeperiodbetweenreachingtechnologicalfeasibilityand
generalreleasewerenotmaterialandaccordinglywereexpensedasincurred.
NoamortizationexpensewasrecordedduringtheyearsendedDecember31,2015and2014,asallpreviouslycapitalizedsoftwaredevelopmentcostshad
beenfullyamortizedasofDecember31,2013.Amortizationexpensefromcapitalizedamountswas$34millionfortheyearendedDecember31,2013.
Amortizationexpenseisincludedincostoflicenserevenuesontheconsolidatedstatementsofincome.
Business Combinations
Forbusinesscombinations,VMwarerecognizestheidentifiableassetsacquired,theliabilitiesassumed,andanynon-controllinginterestsinanacquiree,which
aremeasuredbasedontheacquisitiondatefairvalue.Goodwillismeasuredastheexcessofconsiderationtransferredoverthenetamountsoftheidentifiable
tangibleandintangibleassetsacquiredandtheliabilitiesassumedattheacquisitiondate.
VMwareusessignificantestimatesandassumptions,includingfairvalueestimates,todeterminethefairvalueofassetsacquiredandliabilitiesassumedand
therelatedusefullivesoftheacquiredassets,whenapplicable,asoftheacquisitiondate.Whenthoseestimatesareprovisional,VMwarerefinesthemasnecessary
duringthemeasurementperiod.Themeasurement
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