Adobe 2010 Annual Report Download - page 62

62
fiscal 2008 and 2009 tax returns. These examinations are expected to focus on our intercompany transfer pricing practices as
well as other matters. Although we believe our assumptions, judgments and estimates are reasonable, changes in tax laws or
our interpretation of tax laws and the resolution of the current and any future tax audits could significantly impact the
amounts provided for income taxes in our consolidated financial statements.
Our assumptions, judgments and estimates relative to the value of a deferred tax asset take into account predictions of
the amount and category of future taxable income, such as income from operations or capital gains income. Actual operating
results and the underlying amount and category of income in future years could render our current assumptions, judgments
and estimates of recoverable net deferred taxes inaccurate. Any of the assumptions, judgments and estimates mentioned
above could cause our actual income tax obligations to differ from our estimates, thus materially impacting our financial
position and results of operations.
Recent Accounting Pronouncements
See Note 1 of our Notes to Consolidated Financial Statements for information regarding the effect of new accounting
pronouncements on our financial statements.
Recent Accounting Pronouncements Not Yet Effective
In December 2010, the FASB issued updated accounting guidance related to the calculation of the carrying amount of a
reporting unit when performing the first step of a goodwill impairment test. More specifically, this update will require an
entity to use an equity premise when performing the first step of a goodwill impairment test and if a reporting unit has a zero
or negative carrying amount, the entity must assess and consider qualitative factors and whether it is more likely than not that
a goodwill impairment exists. The new accounting guidance is effective for public entities, for impairment tests performed
during entities’ fiscal years (and interim periods within those years) that begin after December 15, 2010. Early application is
not permitted. We will adopt the new disclosures in the first quarter of fiscal 2012, however as we currently do not have any
reporting units with a zero or negative carrying amount, we do not expect the adoption of this guidance to have an impact on
our consolidated financial statements.
In December 2010, the FASB issued updated accounting guidance to clarify that pro forma disclosures should be
presented as if a business combination occurred at the beginning of the prior annual period for purposes of preparing both the
current reporting period and the prior reporting period pro forma financial information. These disclosures should be
accompanied by a narrative description about the nature and amount of material, nonrecurring pro forma adjustments. The
new accounting guidance is effective for business combinations consummated in periods beginning after December 15, 2010,
and should be applied prospectively as of the date of adoption. Early adoption is permitted. We will adopt the new
disclosures in the second quarter of fiscal 2011. We do not believe that the adoption of this guidance will have a material
impact to our consolidated financial statements.
RESULTS OF OPERATIONS
Overview of 2010
Effective in the first quarter of fiscal 2010, to better align our marketing efforts and go-to-market strategies, we moved
management responsibility for the Connect Solutions product line from our Knowledge Worker segment to our Enterprise
segment. Prior year information has been updated to reflect this change.
For fiscal 2010, we reported record revenue with strong financial results including exceeding $1 billion in quarterly
revenue for the first time in company history. Our performance was driven by continued adoption of CS5, which is our
flagship product family that began shipping in the second quarter of fiscal 2010. Our fiscal 2010 performance also benefitted
from strength in other key business segments including our Knowledge Worker, Omniture, Enterprise and Print and
Publishing segments. Fiscal 2010 financial results also benefitted from an extra week in the first quarter of fiscal 2010 due to
our 52/53 week financial calendar whereby fiscal 2010 is a 53-week year compared with fiscal 2009 which was a 52-week
year.
In our Creative Solutions segment, broad adoption of CS5 continued to drive the overall performance of our creative
business and contributed to strong revenue growth in fiscal 2010 as compared with fiscal 2009. Since its release, CS5
revenue has grown approximately 21% when compared to a comparable period of time for CS4 products. The successful
launch of Adobe Lightroom version 3 also contributed to our success in our creative business.