Adobe 2010 Annual Report Download - page 48

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strategies which could result in future revenue recognition for multiple element arrangements to differ materially from the
results in the current period. Changes in the allocation of the sales price between elements may impact the timing of revenue
recognition, but will not change the total revenue recognized on the contract. We are currently unable to determine the impact
that the newly adopted accounting principles could have on our revenue as these go-to-market strategies evolve.
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.
Changes in, or interpretations of, tax rules and regulations may adversely affect our effective tax rates.
We are a U.S.-based multinational company subject to tax in multiple U.S. and foreign tax jurisdictions. Unanticipated
changes in our tax rates could affect our future results of operations. Our future effective tax rates could be unfavorably
affected by changes in, or interpretation of, tax rules and regulations in the jurisdictions in which we do business, by
unanticipated decreases in the amount of revenue or earnings in countries with low statutory tax rates, by lapses of the
availability of the U.S. research and development tax credit, or by changes in the valuation of our deferred tax assets and
liabilities.
In addition, we are subject to the continual examination of our income tax returns by the Internal Revenue Service
(“IRS”) and other domestic and foreign tax authorities, including a current examination by the IRS of our fiscal 2008 and
2009 tax returns. These examinations are expected to focus on our intercompany transfer pricing practices as well as other
matters. We regularly assess the likelihood of outcomes resulting from these examinations to determine the adequacy of our
provision for income taxes and have reserved for potential adjustments that may result from the current examination. We
believe such estimates to be reasonable; however, there can be no assurance that the final determination of any of these
examinations will not have an adverse effect on our operating results and financial position.
If we are unable to recruit and retain key personnel our business may be harmed.
Much of our future success depends on the continued service and availability of our senior management. These
individuals have acquired specialized knowledge and skills with respect to Adobe. The loss of any of these individuals could
harm our business. Our business is also dependent on our ability to retain, hire and motivate talented, highly skilled
personnel. Experienced personnel in the information technology industry are in high demand and competition for their talents
is intense, especially in the San Francisco Bay Area, where many of our employees are located. We have relied on our ability
to grant equity compensation as one mechanism for recruiting and retaining such highly skilled personnel. Accounting
regulations requiring the expensing of equity compensation may impair our ability to provide these incentives without
incurring significant compensation costs. If we are unable to continue to successfully attract and retain key personnel, our
business may be harmed. Effective succession planning is also a key factor for our long-term success. Our failure to enable
the effective transfer of knowledge and facilitate smooth transitions with regards to our key employees could adversely affect
our long-term strategic planning and execution.
We believe that a critical contributor to our success to date has been our corporate culture, which we believe fosters
innovation and teamwork. As we grow, including from the integration of employees and businesses acquired in connection
with our previous or future acquisitions, we may find it difficult to maintain important aspects of our corporate culture which
could negatively affect our ability to retain and recruit personnel and otherwise adversely affect our future success.
Our investment portfolio may become impaired by deterioration of the capital markets.
Our cash equivalent and short-term investment portfolio as of December 3, 2010 consisted of money market mutual
funds, U.S. Treasury securities, U.S. agency securities, municipal securities, corporate bonds and foreign government
securities. We follow an established investment policy and set of guidelines to monitor and help mitigate our exposure to
interest rate and credit risk. The policy sets forth credit quality standards and limits our exposure to any one issuer, as well as
our maximum exposure to various asset classes.