Adobe 1998 Annual Report Download - page 45

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ADOBE SYSTEMS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share data)
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES
Operations
Founded in 1982, Adobe Systems Incorporated (‘‘Adobe’’ or the ‘‘Company’’) develops, markets, and
supports computer software products and technologies that enable users to express and use information
across print and electronic media. The Company licenses its technology to major computer, printing, and
publishing suppliers, and markets a line of application software products, type products, and content for
creating, distributing, and managing information of all types. Additionally, the Company markets a line of
products for home and small business users. The Company distributes its products through a network of
original equipment manufacturer (‘‘OEM’’) customers, distributors and dealers, and value-added resellers
(‘‘VARs’’) and systems integrators. The Company has operations in North America, Europe, Japan, and
Asia Pacific and Latin America.
Fiscal year
The Company’s fiscal year is a 52/53-week year ending on the Friday closest to November 30.
Basis of consolidation
The accompanying consolidated financial statements include those of Adobe and its subsidiaries, after
elimination of all significant intercompany accounts and transactions.
Recapitalization
In May 1997, the Company was reincorporated in the State of Delaware. As part of this reincorpora-
tion, each outstanding share of the predecessor California Corporation preferred stock and common stock
was converted automatically to one share of the new Delaware Corporation $0.0001 par value preferred
stock and common stock. All prior periods presented have been restated to reflect this change.
Use of 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 and disclosure of contingent liabilities, at the date of the financial statements, and reported
amounts of revenues and expenses during the reporting period. Actual results could differ from those
estimates.
Cash equivalents and short-term investments
Cash equivalents consist of instruments with maturities of three months or less at the time of
purchase.
All of the Company’s cash equivalents and short-term investments, and certain restricted funds and
noncurrent investments in equity securities, free of trading restrictions or to become free of trading
restrictions within one year, are classified as ‘‘available-for-sale.’’ These investments are carried at fair
value, based on quoted market prices, and unrealized gains and losses, net of taxes, are reported as a
separate component of stockholders’ equity. Realized gains and losses upon sale or maturity of these
investments are determined using the specific identification method.
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