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89
Fiscal 2006:
Income Statement Classifications
Option Grants
and Stock
Purchase Rights
Restricted
Stock and
Performance
Awards
Cost of revenue—services and support........................ $ 8,180 $ —
Research and development........................................... 63,950 1,678
Sales and marketing ..................................................... 66,792 1,500
General and administrative ........................................... 27,121 1,313
Total............................................................................ $ 166,043 $ 4,491
Beginning in the first quarter of fiscal 2006, we account for stock-based compensation in accordance with SFAS 123R.
Under the fair value recognition provisions of this statement, stock-based compensation cost is measured at the grant date
based on the fair value of the award and is recognized as expense on a straight-line basis over the requisite service period,
which is the vesting period. We elected the modified-prospective method, under which prior periods are not revised for
comparative purposes. The valuation provisions of SFAS 123R apply to new grants and to grants that were outstanding prior
to the effective date and are subsequently modified. Estimated compensation for grants that were outstanding as of the
effective date will be recognized over the remaining service period using the compensation cost estimated for the SFAS No.
123 (“SFAS 123”), “Accounting for Stock-Based Compensation” pro forma disclosures.
Prior to the adoption of SFAS 123R, we recognized the estimated compensation cost of restricted stock over the vesting
term. The estimated compensation cost is based on the fair value of our common stock on the date of grant. We continue to
recognize the compensation cost, net of estimated forfeitures, over the vesting term.
In accordance with SFAS 123R, we recognize the estimated compensation cost of performance shares, net of estimated
forfeitures. The awards are earned upon attainment of identified performance goals, some of which contain discretionary
metrics, and are accounted for based upon the fair value of the award at each reporting date. As such, these awards are re-
valued based on our traded stock price at the end of each reporting period. If the discretion is removed, the award will be
classified as a fixed equity award. The fair value of the awards will be based on the measurement date, which is the date the
award becomes fixed. The awards will be subsequently amortized over the remaining performance period.
As of November 30, 2007, there was $142.8 million of unrecognized compensation cost, adjusted for estimated
forfeitures, related to non-vested stock-based payments granted to our employees which will be recognized over a weighted
average period of 2.7 years. Additionally, as of November 30, 2007, there was $23.4 million of unamortized stock-based
compensation, adjusted for estimated forfeitures, related to the assumption of Macromedia unvested options which will be
recognized over a weighted average period of 1.6 years. Total unrecognized compensation cost will be adjusted for future
changes in estimated forfeitures.
Pursuant to the income tax provisions included in SFAS 123R, we have elected the “long method” of computing our
hypothetical additional paid-in-capital pool. Prior to the adoption of SFAS 123R, all tax benefits for deductions resulting
from the exercise of stock options and disqualifying dispositions were presented as operating cash flows on our consolidated
statement of cash flows. SFAS 123R required the benefits of tax deductions in excess of recognized compensation expense to
be reported as a financing cash flow, rather than as an operating cash flow. This requirement reduced net operating cash
flows and increased net financing cash flows in periods after adoption. Total cash flow remained unchanged from what
would have been reported under prior accounting rules.
Prior to the first quarter of fiscal 2006, we accounted for our stock-based compensation plans under the recognition and
measurement provisions of APB 25 as permitted by SFAS 123, amended by SFAS No. 148 (“SFAS 148”), “Accounting for
Stock-Based Compensation-Transition and Disclosure”. As required by SFAS 148, prior to the adoption of SFAS 123R, we
provided pro forma net income and pro forma net income per share disclosures for stock-based awards, as if the fair value-
based method defined in SFAS 123 had been adopted.