Adobe 2000 Annual Report Download - page 55

NOTE 1. SIGNIFICANT ACCOUNTING POLICIES
Operations Founded in 1982, Adobe Systems Incorporated (“Adobe”) is a provider of
graphic design, publishing, and imaging software for Web and print production. We offer
a market-leading line of application software products, type products, and content for
creating, distributing, and managing information of all types; license our technology to
major hardware manufacturers, software developers, and service providers; and offer inte-
grated software solutions to businesses of all sizes. We distribute our products through a
network of distributors and dealers, value-added resellers (“VA R s ”), systems integrators,
and original equipment manufacturer (“OEM”) partners; direct to end users through
Adobe call centers; and through our own Web site at www.adobe.com. We have operations
in the Americas; Europe, Middle East, and Africa (“EMEA”); and Asia.
Fiscal Year Our 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 our subsidiaries, after elimination of all intercompany accounts
and transactions.
Use of Estimates In the preparation of financial statements in conformity with account-
ing principles generally accepted in the United States of America, we must 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.
We classify all of our 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, as “available-for-sale.” We carry these
investments at fair value, based on quoted market prices, and unrealized gains and losses,
net of taxes, are included in accumulated other comprehensive income, which is reflected
as a separate component of stockholders’ equity. If the market value adjustment results in
a loss of value due to an other-than-temporary impairment, the loss will be transferred
from accumulated other comprehensive income and recorded in other income in the
consolidated income statement.
We determine realized gains and losses upon sale or maturity of these investments using
the specific identification method.
Foreign Currency Translation We translate assets and liabilities of foreign subsidiaries,
whose functional currency is the local currency, at year-end exchange rates. We translate
revenues and expenses at the average rates of exchange prevailing during the year. We
include the adjustment resulting from translating the financial statements of such foreign
subsidiaries in accumulated other comprehensive income, which is reflected as a separate
component of stockholders’ equity. We report certain other transaction gains or losses,
which have not been material, in results of operations.
Property and Equipment We record property and equipment at cost. Depreciation and
amortization are calculated using the straight-line method over the shorter of the estimated
useful lives (thirty-five years for buildings; two to seven years for furniture and equipment)
or lease terms (five to nine years for leasehold improvements) of the respective assets.
Other Assets Purchased technology, goodwill, and certain other intangible assets are stated
at cost less accumulated amortization. We record amortization utilizing the straight-line
method over the estimated useful lives of the respective assets, generally three to seven
years. Capitalization of computer software development costs, when material, begins upon
the establishment of technological feasibility, which is generally the completion of a working
prototype that has been certified as having no critical bugs and is a release candidate. To
date, software development costs incurred between completion of a working prototype and
general availability of the related product have not been material.
Long-lived Assets We review property and equipment for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not be recov-
erable. We measure the recoverability of property and equipment by comparison of our
Notes to Consolidated Financial Statements (In thousands, except share and per share data)