Adobe 2009 Annual Report Download - page 43

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costs associated with our global operations and could become subject to legal penalties in foreign countries if we do not
comply with local laws and regulations, which may be substantially different from those in the U.S. In many foreign
countries, particularly in those with developing economies, it is common to engage in business practices that are prohibited
by U.S. regulations applicable to us such as the Foreign Corrupt Practices Act. Although we implement policies and
procedures designed to ensure compliance with these laws, there can be no assurance that all of our employees, contractors
and agents, as well as those companies to which we outsource certain of our business operations, including those based in or
from countries where practices which violate such U.S. laws may be customary, will not take actions in violation of our
internal policies. Any such violation, even if prohibited by our internal policies, could have an adverse effect on our business.
We may incur losses associated with currency fluctuations and may not be able to effectively hedge our exposure.
Our operating results are subject to fluctuations in foreign currency exchange rates. We attempt to mitigate a portion of
these risks through foreign currency hedging, based on our judgment of the appropriate trade-offs among risk, opportunity
and expense. We have established a hedging program to partially hedge our exposure to foreign currency exchange rate
fluctuations primarily for the Japanese Yen and the Euro. We regularly review our hedging program and make adjustments as
necessary based on the judgment factors discussed above. Our hedging activities may not offset more than a portion of the
adverse financial impact resulting from unfavorable movement in foreign currency exchange rates, which could adversely
affect our financial condition or results of operations.
Changes in, or interpretations of, accounting principles could result in unfavorable accounting charges.
We prepare our consolidated financial statements in accordance with accounting principles generally accepted in the
United States of America (“GAAP”). These principles are subject to interpretation by the SEC and various bodies formed to
interpret and create appropriate accounting principles. A change in these principles can have a significant effect on our
reported results and may even retroactively affect previously reported transactions. Our accounting principles that recently
have been or may be affected by changes in the accounting principles are as follows:
• software and subscription revenue recognition;
• accounting for stock-based compensation;
• accounting for income taxes; and
• accounting for business combinations and related goodwill.
In December 2007, the Financial Accounting Standards Board (“FASB”) issued revised standards for business
combinations, which changes the accounting for business combinations including timing of the measurement of acquirer
shares issued in consideration for a business combination, the timing of recognition and amount of contingent consideration,
the accounting for pre-acquisition gain and loss contingencies, the recognition of capitalized in-process research and
development, the accounting for acquisition related restructuring liabilities, the treatment of acquisition related transaction
costs and the recognition of changes in the acquirer’s income tax valuation allowance. The revised standards for business
combinations is effective for financial statements issued for fiscal years beginning after December 15, 2008. The revised
standards for business combinations are effective for us beginning the first quarter of fiscal 2010. We currently believe that
the adoption of the revised standards for business combinations will result in the recognition of certain types of expenses in
our results of operations that we currently capitalize pursuant to existing accounting standards.
If our goodwill or amortizable intangible assets become impaired we may be required to record a significant charge to
earnings.
Under GAAP, we review our goodwill and amortizable intangible assets for impairment when events or changes in
circumstances indicate the carrying value may not be recoverable. Goodwill is required to be tested for impairment at least
annually. Factors that may be considered a change in circumstances indicating that the carrying value of our goodwill or
amortizable intangible assets may not be recoverable include a decline in stock price and market capitalization, future cash
flows, and slower growth rates in our industry. We may be required to record a significant charge to earnings in our financial
statements during the period in which any impairment of our goodwill or amortizable intangible assets is determined,
resulting in an impact on our results of operations. For example, our Mobile and Device Solutions business, which is reported