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Accounting Policies (Policies)
9 Months Ended
Dec. 31, 2016
Accounting Policies [Abstract]  
Basis of Presentation
Basis of Presentation: The accompanying unaudited condensed consolidated financial statements (Condensed Consolidated Financial Statements) of CA, Inc. (Company) have been prepared in accordance with U.S. generally accepted accounting principles (GAAP), as defined in Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 270, for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Securities and Exchange Commission Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. All such adjustments are of a normal, recurring nature.
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Although these estimates are based on management’s knowledge of current events and actions it may undertake in the future, these estimates may ultimately differ from actual results.
Operating results for the three and nine months ended December 31, 2016 are not necessarily indicative of the results that may be expected for the fiscal year ending March 31, 2017.
For further information, refer to the Company’s consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2016 (2016 Form 10-K).
Divestitures
Divestitures: In the fourth quarter of fiscal year 2016, the Company sold its CA ERwin Data Modeling solution assets (ERwin). The results of operations associated with this business have been presented as discontinued operations in the accompanying condensed consolidated statements of operations (Condensed Consolidated Statements of Operations) for the three and nine months ended December 31, 2015 and condensed consolidated statements of cash flows (Condensed Consolidated Statements of Cash Flows) for the nine months ended December 31, 2015.
Cash and Cash Equivalents
Cash and Cash Equivalents: The Company’s cash and cash equivalents are held in numerous locations throughout the world, with approximately 79% being held by the Company’s foreign subsidiaries outside the United States at December 31, 2016.
New Accounting Pronouncements
New Accounting Pronouncements: In May 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers, with amendments in 2015 and 2016, which creates new ASC Topic 606 (Topic 606) that will replace most existing revenue recognition guidance in GAAP when it becomes effective. Topic 606 requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The new standard will be effective for the Company’s first quarter of fiscal year 2019 and early application for fiscal year 2018 is permitted. Topic 606 may be applied retrospectively to each prior period presented or with the cumulative effect recognized as of the date of initial application. The Company does not currently intend to adopt the provisions of the new standard early and has not yet selected a transition method. While the Company is continuing to assess all potential effects of the new standard, it currently anticipates that this standard will have a material effect on its consolidated financial statements and believes the most significant impact relates to the timing of the recognition of its software license revenue. Specifically, under the new standard, the Company currently expects to recognize license revenue for its Mainframe Solutions and Enterprise Solutions products at the point in time the licensed software is transferred to the customer, rather than ratably over the term of the customer contract, which is required by existing GAAP for most of the Company’s software arrangements. The Company also currently believes that the point in time recognition requirement of the new standard will increase the variability of its revenue. The Company does not currently expect Topic 606 to have a significant effect on the timing of revenue recognition for its maintenance, SaaS and professional services contracts. Under Topic 606, more judgment and estimates will be required within the revenue recognition process than are required under existing GAAP, including estimating the standalone selling price for each performance obligation identified within the Company’s contracts. The Company currently expects Topic 606 to have other significant effects on its revenue recognition policies and disclosures.
In February 2016, the FASB issued Accounting Standards Update No. 2016-02 (ASU 2016-02), Leases (Topic 842), which requires a lessee to recognize assets and liabilities on its consolidated balance sheet for leases with accounting lease terms of more than 12 months. ASU 2016-02 will replace most existing lease accounting guidance in GAAP when it becomes effective. The new standard states that a lessee will recognize a lease liability for the obligation to make lease payments and a right-of-use asset for the right to use the underlying asset for the lease term. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the consolidated statements of operations. ASU 2016-02 will be effective for the Company’s first quarter of fiscal year 2020 and requires the modified retrospective method of adoption. Early adoption is permitted. Although the Company is currently evaluating the timing of adoption and the effect that ASU 2016-02 will have on its consolidated financial statements and related disclosures, the Company currently expects that most of its operating lease commitments will be subject to the new standard and recognized as operating lease liabilities and right-of-use assets upon adoption.
In March 2016, the FASB issued Accounting Standards Update No. 2016-09 (ASU 2016-09), Improvements to Employee Share-Based Payment Accounting (Topic 718), which is intended to simplify several aspects of the accounting for share-based payment award transactions, including the income tax consequences and classification on the statement of cash flows. ASU 2016-09 will be effective for the Company’s first quarter of fiscal year 2018 and early adoption is permitted. The Company currently plans on adopting ASU 2016-09 in the first quarter of fiscal year 2018. The most significant aspect of this standard for the Company when adopted relates to the presentation of cash flows for employee taxes paid by withholding shares of restricted stock awards as a financing activity within the Condensed Consolidated Statements of Cash Flows, which has been historically presented as an operating activity. This update from ASU 2016-09 requires a retrospective method of adoption. All other aspects of ASU 2016-09 are not currently expected to have a material effect on the Company’s consolidated financial statements and related disclosures.
In August 2016, the FASB issued Accounting Standards Update No. 2016-15 (ASU 2016-15), Classification of Certain Cash Receipts and Cash Payments (Topic 230), which is intended to reduce diversity in practice on how certain cash receipts and cash payments are classified and presented in the statement of cash flows. In November 2016, the FASB issued Accounting Standards Update No. 2016-18 (ASU 2016-18), Restricted Cash (Topic 230), which is intended to reduce diversity in practice on how changes in restricted cash are classified and presented in the statement of cash flows. ASU 2016-18 requires amounts generally described as restricted cash to be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. Both ASU 2016-15 and ASU 2016-18 will be effective for the Company’s first quarter of fiscal year 2019 and require a retrospective transition method of adoption. Early adoption is permitted. The Company currently anticipates adopting ASU 2016-15 and ASU 2016-18 in the first quarter of fiscal year 2018. The Company does not currently expect the adoption of these standards to have a material effect on its consolidated financial statements and related disclosures.
In October 2016, the FASB issued Accounting Standards Update No. 2016-16 (ASU 2016-16), Intra-Equity Transfers of Assets Other Than Inventory (Topic 740), which is intended to eliminate diversity in practice and provide a more accurate depiction of the tax consequences on intercompany asset transfers (excluding inventory). ASU 2016-16 requires entities to immediately recognize the tax consequences on intercompany asset transfers (excluding inventory) at the transaction date, rather than deferring the tax consequences under current GAAP. ASU 2016-16 will be effective for the Company’s first quarter of fiscal year 2019 and requires a modified retrospective method of adoption. Early adoption is permitted, but only in the first quarter of an entity’s annual fiscal year. The Company is currently evaluating the timing of adoption and the effect that ASU 2016-16 will have on its consolidated financial statements and related disclosures.