Adobe 2007 Annual Report Download - page 82

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Ventures at November 30, 2007 and December 1, 2006 is not publicly traded and, therefore, there is no established market
for these securities. In order to determine the fair value of these investments, we use the most recent round of financing
involving new non-strategic investors or estimates of current market value made by Granite Ventures. It is our policy to
evaluate the fair value of these investments held by Adobe Ventures, as well as our direct investments, on a regular basis.
This evaluation includes, but is not limited to, reviewing each company’ s cash position, financing needs, earnings and
revenue outlook, operational performance, management and ownership changes and competition. In the case of privately-held
companies, this evaluation is based on information that we request from these companies. This information is not subject to
the same disclosure regulations as U.S. publicly traded companies and as such, the basis for these evaluations is subject to the
timing and the accuracy of the data received from these companies. If we believe the carrying value of our investment is in
excess of fair value, it is our policy to write down the investment to fair value.
Our direct investments are accounted for under the cost method and are evaluated for other-than-temporary declines in
fair value below carrying value as noted above.
Prepaid royalties increased due to new royalty agreements during fiscal 2007.
Other assets include the fair value, at inception, of the residual value guarantee associated with our leases on the
buildings we occupy as part of our corporate headquarters, in accordance with FIN 45. The lease agreements for our
corporate headquarters provide for residual value guarantees. Under FIN 45, the fair value of a residual value guarantee in
lease agreements entered into after December 31, 2002, must be recognized as a liability on our consolidated balance sheet.
As such, we recognized $5.2 million and $3.0 million in liabilities, related to the extended East and West Towers and
Almaden Tower leases, respectively. These liabilities are recorded in other long-term liabilities with the offsetting entry
recorded as prepaid rent in other assets. The balance will be amortized to the income statement over the life of the leases. As
of November 30, 2007, the unamortized portion of the fair value of the residual value guarantees remaining in other long-
term liabilities and prepaid rent was $4.2 million.
The following table summarizes the net realized gains and losses from our investments for fiscal 2007, 2006 and 2005.
2007 2006 2005
Net gains (losses) related to our investments in Adobe
Ventures and cost method investments .............. $ 6,951 $ (6,48
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) $ (1,021 )
Write-downs due to other-than-temporary declines in value
of our marketable equity securities ................. — — (558 )
Gains from sale of short-term investments............. — — 104
Gains (losses) on stock warrants ..................... (21) (226 ) 153
Other investment gains............................. 204 67,962 21
Total investment gain (loss)....................... $ 7,134 $ 61,24
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$ (1,301 )
Investment gains were higher in fiscal 2006 when compared to fiscal 2007 and fiscal 2005 due to the sale of our
investment in Atom Entertainment, Inc. during the fourth quarter of fiscal 2006. As a result of the sale, we received $82.3
million in cash. Our carrying value was $13.2 million at the date of sale.
Note 7. Trade Payables and Accrued Expenses
Trade and other payables consisted of the following as of November 30, 2007 and December 1, 2006:
2007 2006
Trade payables............................................. $ 41,724 $ 37,915
Tax and other payables ...................................... 25,143 17,116
Total trade and other payables............................... $66,867 $ 55,031