Basis Of Presentation

12 Months Ended

Oct. 29, 2011

Basis Of Presentation [Abstract]

Basis Of Presentation

1. Basis of Presentation

The fiscal year for Brocade Communications Systems, Inc. ("Brocade" or the "Company") is the 52 or 53 weeks ending on the last Saturday in October. As is customary for companies that use the 52/53-week convention, every fifth year contains a 53-week year. Fiscal years 2011 and 2010 were 52-week fiscal years and fiscal year 2009 was a 53-week fiscal year. The second quarter of fiscal year 2009 consisted of fourteen weeks, which was one week longer than a typical quarter. The Company's next 53-week fiscal year will be fiscal year 2014 and our next 14-week quarter will be in the second quarter of fiscal year 2014. The Consolidated Financial Statements include the accounts of Brocade and its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated.

Reclassification

During fiscal year 2010, we reviewed our cost classification, primarily related to our system engineer ("SE") costs that were previously classified within cost of revenues. The SE's primary role has migrated over time from assisting with customer support to primarily performing pre-sales activity to generate future business, which was enabled by the growth of our support organization, such that starting in 2010 the majority of the SE's time was spent on pre-sales activity. As a result of this change, we have reclassified the SE costs within our Consolidated Statements of Operations starting in fiscal year 2010. These costs are now presented within sales and marketing expenses, as opposed to cost of revenues. This reclassification did not impact revenues, income from operations, net income, or earnings per share. Prior period amounts have not been updated for the new cost classification implemented in fiscal year 2010.

For comparative purposes, had the reclassification been affected for fiscal year 2009, the pro forma cost of revenues for each of the Company's reportable segment and sales and marketing expenses would have been as follows (in thousands):

	Pro Forma Amount
	Fiscal Year Ended October 31, 2009
Cost of revenues
Data Storage Products	$	408,026
Ethernet Products		228,908
Global Services		161,946
Total cost of revenues		798,880
Sales and marketing expenses	$	505,701

Correction of Immaterial Errors

The Company's prior year financial results, including the fiscal years ended October 30, 2010 and October 31, 2009, respectively, have been adjusted to reflect certain immaterial corrections. During fiscal year 2011, the Company identified errors in its accounting for certain sales discounts and sales incentives that impacted multiple prior periods and that had accumulated to an amount of $17.1 million. The Company concluded that the errors were not material to any of its prior period financial statements under the applicable guidance for accounting changes and error corrections. The correction resulted in immaterial changes to sales discounts allowances and marketing incentive accruals which affected net revenues during fiscal years 2007 through 2010 and the six months ended April 30, 2011, resulting in an overstatement of net revenues in some periods and an understatement in other periods. Although the errors were and continue to be immaterial to prior periods, because of the impact of the cumulative out-of-period correction in the fiscal year 2011, the Company applied the guidance for accounting changes and error corrections and revised its prior period financial statements presented.

As a result of the revisions, net revenues were decreased by $3.2 million and $2.6 million for the fiscal years ended October 30, 2010 and October 31, 2009, respectively. Net revenues decreased by $1.8 million for the six months ended April 30, 2011 and the remaining corrections to net revenues of $9.5 million relates to periods before fiscal year 2009. Total assets and stockholders' equity were decreased by $8.2 million and $10.9 million, respectively, and total liabilities were increased by $2.7 million, net of tax effect, as of October 30, 2010. Additionally, after tax effects, net income decreased by $2.3 million for the fiscal year ended October 30, 2010 and net loss increased by $1.8 million for the fiscal year ended October 31, 2009.