Adobe 2010 Annual Report Download - page 86

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ADOBE SYSTEMS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
86
NOTE 1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
Operations
Founded in 1982, Adobe Systems Incorporated is one of the largest and most diversified software companies in the
world. We offer a line of creative, business, Web and mobile software and services used by creative professionals, knowledge
workers, developers, marketers, enterprises and consumers for creating, managing, delivering, optimizing and engaging with
compelling content and experiences across multiple operating systems, devices and media. We distribute our products
through a network of distributors, value-added resellers (“VARs”), systems integrators, independent software vendors
(“ISVs”) and original equipment manufacturers (“OEMs”). We also market and license our software directly to enterprise
customers through our sales force and to end users and through our own Website at www.adobe.com. In addition, we license
our technology to hardware manufacturers, software developers and service providers, and provide some of our solutions via
Software as a Service (“SaaS”), also known as hosted or “cloud-based” offerings. Our software runs on personal computers
(“PC”) and server-based computers, as well as various non-PC and mobile devices, depending on the product. We have
operations in the Americas, Europe, Middle East and Africa (“EMEA”) and Asia.
Basis of Presentation
The accompanying Consolidated Financial Statements include those of Adobe and its subsidiaries, after elimination of
all intercompany accounts and transactions. We have prepared the accompanying Consolidated Financial Statements in
accordance with accounting principles generally accepted in the United States of America (“GAAP”) and pursuant to the
rules and regulations of the Securities and Exchange Commission (the “SEC”).
Use of Estimates
In preparation of consolidated financial statements and related disclosures in conformity with GAAP and pursuant to the
rules and regulations of the SEC, we must make estimates and judgments that affect the amounts reported in the Consolidated
Financial Statements and accompanying notes. Estimates are used for, but not limited to sales allowances and programs, bad
debts, stock-based compensation, determining the fair value of acquired assets and assumed liabilities, excess inventory and
purchase commitments, restructuring costs, facilities lease losses, impairment of goodwill and intangible assets, litigation,
income taxes and investments. Actual results may differ materially from these estimates.
Fiscal Year
Our fiscal year is a 52- or 53-week year that ends on the Friday closest to November 30. Fiscal 2010 is a 53-week year
compared with fiscal years 2009 and 2008 which were 52-week years.
Reclassification
Certain immaterial prior year amounts have been reclassified to conform to current year presentation in the Consolidated
Statements of Cash Flows.
Significant Accounting Policies
Revenue Recognition
Our revenue is derived from the licensing of software products, associated software maintenance and support plans,
custom software development and consulting services and training. To a lesser extent our revenue includes non-software
related hosting services, custom hosting development and consulting services, and technical support and training for hosting
services.
We recognize revenue when all four revenue recognition criteria have been met: persuasive evidence of an arrangement
exists, we have delivered the product or performed the service, the fee is fixed or determinable and collection is probable.
Determining whether and when some of these criteria have been satisfied often involves assumptions and judgments that can
have a significant impact on the timing and amount of revenue we report.
Multiple Element Arrangements
We enter into multiple element revenue arrangements in which a customer may purchase a combination of software,
upgrades, maintenance and support, hosting services, and consulting.