Adobe 2012 Annual Report Download - page 59

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liabilities, and for operating losses and tax credit carryforwards. Management must make assumptions, judgments and estimates
to determine our current provision for income taxes and also our deferred tax assets and liabilities and any valuation allowance
to be recorded against a deferred tax asset.
Our assumptions, judgments and estimates relative to the current provision for income taxes take into account current tax
laws, our interpretation of current tax laws and possible outcomes of current and future audits conducted by foreign and domestic
tax authorities. We have established reserves for income taxes to address potential exposures involving tax positions that could
be challenged by tax authorities. In addition, we are subject to the continual examination of our income tax returns by the IRS and
other domestic and foreign tax authorities, including a current examination by the IRS for our 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.
We are a United States-based multinational company subject to tax in multiple U.S. and foreign tax jurisdictions. A significant
portion of our foreign earnings for the current fiscal year were earned by our Irish subsidiaries. In addition to providing for U.S.
income taxes on earnings from the U.S., we provide for U.S. income taxes on the earnings of foreign subsidiaries unless the
subsidiaries' earnings are considered permanently reinvested outside the U.S. While we do not anticipate changing our intention
regarding permanently reinvested earnings, if certain foreign earnings previously treated as permanently reinvested are repatriated,
the related U.S. tax liability may be reduced by any foreign income taxes paid on these earnings.
Our income tax expense has differed from the tax computed at the U.S. federal statutory income tax rate due primarily to
discrete items and to earnings considered as permanently reinvested in foreign operations. Our future effective tax rates could be
unfavorably affected by changes in the tax rates in jurisdictions where our income is earned, by changes in, or our interpretation
of, tax rules and regulations in the jurisdictions in which we do business, by unanticipated decreases in the amount of 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.
Recent Accounting Pronouncements
There have been no new accounting pronouncements made effective during the year ended November 30, 2012, that are
of significance, or potential significance, to us.
Recent Accounting Pronouncements Not Yet Effective
There have been no new accounting pronouncements not yet effective that have significance, or potential significance, to
our consolidated financial statements.
RESULTS OF OPERATIONS
Overview of 2012
Effective in the first quarter of fiscal 2012, we modified our segments due to changes in how we operate our business. We
combined our Creative and Interactive Solutions segment with our Digital Media Solutions segment and our Knowledge Worker
segment, and named it Digital Media. We also renamed our Omniture segment to Digital Marketing and combined it with our
Enterprise segment. These changes reflect our focus on our two strategic growth opportunities. Our Print and Publishing segment,
which contains many of our mature products and solutions, continues to be reported as it was in fiscal 2011 and 2010. See Note
18 of our Notes to Consolidated Financial Statements for further segment and geographical information. Prior year information
below has been updated to reflect these changes.
For fiscal 2012, we reported solid financial results and executed against our two strategic growth areas, Digital Media and
Digital Marketing, while continuing to market and license a broad portfolio of products and solutions.
In May 2012, we launched Adobe Creative Suite 6 (“CS6”) which is at the center of Adobe Creative Cloud, our new
subscription-based offering for creating and publishing content and applications that was also released in May 2012. The launch
of CS6 included major updates to all of our core Creative Suite (“CS”) point products as well as four suite versions. Over time,
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