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ADOBE SYSTEMS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
105
are recorded in other long-term liabilities with the offsetting entry recorded as prepaid rent in other assets. The balance is
being amortized to the Consolidated Statements of Income over the life of the leases. As of December 3, 2010 and November
27, 2009, the unamortized portion of the fair value of the residual value guarantees remaining in other long-term liabilities
and prepaid rent was $0.7 million and $1.3 million, respectively.
NOTE 9. ACCRUED EXPENSES
Accrued expenses as of December 3, 2010 and November 27, 2009 consisted of the following (in thousands):
2010
2009
Accrued compensation and benefits .....................................................................
$
290,366
$
164,352
Sales and marketing allowances ...........................................................................
38,706
32,774
Accrued marketing ................................................................................................
26,404
28,233
Taxes payable .......................................................................................................
21,800
11,879
Accrued interest expense ......................................................................................
21,203
1,355
Other .....................................................................................................................
165,796
181,053
Accrued expenses ..............................................................................................
$
564,275
$
419,646
Other primarily includes general corporate accruals for local and regional expenses and technical support. Other is also
comprised of deferred rent related to office locations with rent escalations, accrued royalties and foreign currency derivatives.
NOTE 10. INCOME TAXES
Income before income taxes includes income from foreign operations of $659.3 million, $422.4 million and $740.3
million for fiscal 2010, 2009 and 2008, respectively.
The provision for income taxes for fiscal 2010, 2009 and 2008 consisted of the following (in thousands):
2010
2009
2008
Current:
United States federal .............................................................................
$
260,118
$
152,840
$
24,179
Foreign ..................................................................................................
44,869
36,794
27,680
State and local .......................................................................................
31,866
25,427
6,972
Total current ..............................................................................................
336,853
215,061
58,831
Deferred:
United States federal .............................................................................
(158,350)
50,376
41,678
Foreign ..................................................................................................
(6,475)
559
(9,693
)
State and local .......................................................................................
(14,665)
4,635
25,518
Total deferred ............................................................................................
(179,490)
55,570
57,503
Tax expense attributable to employee stock plans ....................................
11,108
44,381
90,360
Provision for income taxes ....................................................................
$
168,471
$
315,012
$
206,694
Total income tax expense differs from the expected tax expense (computed by multiplying the U.S. federal statutory rate
of 35% by income before income taxes) as a result of the following (in thousands):
2010
2009
2008
Computed “expected” tax expense ...........................................................
$
330,103
$
245,532
$
377,478
State tax expense, net of federal benefit ...................................................
13,444
7,799
12,700
Tax credits ................................................................................................
(1,317
)
(14,127
)
(12,873
)
Differences between statutory rate and foreign effective tax rate ............
(129,063
)
(91,262
)
(132,470
)
Change in deferred tax asset valuation allowance ....................................
1,408
2,759
(1,105
)
Stock-based compensation (net of tax deduction) ....................................
4,181
6,085
5,457
Resolution of U.S. income tax exams ......................................................
(39,753)
—
(20,712
)
Foreign tax refund for fiscal 2000 - 2002 .................................................
—
—
(16,351
)
Domestic manufacturing deduction benefit ..............................................
(14,630
)
(7,525
)
(6,300
)
Tax charge for licensing Omniture’ s technology to foreign subsidiaries
—
161,701
—
Other, net ..................................................................................................
4,098
4,050
870
Provision for income taxes ...................................................................
$
168,471
$
315,012
$
206,694