Adobe 2010 Annual Report Download - page 47

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We have issued $1.5 billion of notes in a debt offering and may incur other debt in the future, which may adversely affect our
financial condition and future financial results.
In the first quarter of fiscal year 2010 we issued $1.5 billion in senior unsecured notes. We also have a currently undrawn
$1.0 billion revolving credit facility. Although we have no current plans to request any advances under this credit facility, we
may use the proceeds of any future borrowing for general corporate purposes or for future acquisitions or expansion of our
business.
This debt may adversely affect our financial condition and future financial results by, among other things:
• requiring the dedication of a portion of our expected cash from operations to service our indebtedness, thereby
reducing the amount of expected cash flow available for other purposes, including capital expenditures and
acquisitions; and
• limiting our flexibility in planning for, or reacting to, changes in our business and our industry.
Our senior unsecured notes and revolving credit facility impose restrictions on us and require us to maintain compliance
with specified covenants. Our ability to comply with these covenants may be affected by events beyond our control. If we
breach any of the covenants and do not obtain a waiver from the lenders or noteholders, then, subject to applicable cure
periods, any outstanding indebtedness may be declared immediately due and payable.
In addition, changes by any rating agency to our credit rating may negatively impact the value and liquidity of both our
debt and equity securities. Under certain circumstances, if our credit ratings are downgraded or other negative action is taken,
an increase in the interest rate payable by us under our revolving credit facility could result. In addition, any downgrades in
our credit ratings may affect our ability to obtain additional financing in the future and may affect the terms of any such
financing.
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; 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 were effective for us beginning the first quarter of fiscal 2010. We have and will continue to incur expenses
related to acquisitions and this will have an impact on our financial performance.
In October 2009, the FASB amended the accounting standards for certain multiple deliverable revenue arrangements to:
(1) provide updated guidance on whether multiple deliverables exist, how the deliverables in an arrangement should be
separated, and how the consideration should be allocated; (2) require an entity to allocate revenue in an arrangement using
the best estimated selling price (“BESP”) of deliverables if a vendor does not have vendor-specific objective evidence
(“VSOE”) of selling price or third-party evidence (“TPE”) of selling price; and (3) eliminate the use of the residual method
and require an entity to allocate revenue using the relative selling price method. We elected to early adopt this accounting
guidance at the beginning of our first quarter of fiscal year 2010 on a prospective basis for applicable transactions originating
or materially modified after November 27, 2009. The new accounting standards for revenue recognition if applied in the
same manner to the year ended November 27, 2009 would not have had a material impact on total net revenues for that fiscal
year. In terms of the timing and pattern of revenue recognition, the new accounting guidance for revenue recognition is not
expected to have a significant effect on total net revenues in periods after the initial adoption when applied to multiple-
element arrangements based on current go-to-market strategies due to the existence of VSOE across certain of our product
and service offerings. However, we expect that the new accounting standards will enable us to evolve our go-to-market