Adobe 1998 Annual Report Download - page 48

ADOBE SYSTEMS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share data)
(Continued)
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Put warrants and call options
The Company utilizes put warrants and call option arrangements to facilitate the repurchase of its
common stock. The puts and calls permit, at the Company’s option, physical delivery or net share
settlement equal to the difference between the exercise price and the value of the option as determined by
the contract. Accordingly, in-the-money put warrants do not result in a liability on the balance sheet.
Net income per share
In fiscal 1998, the Company adopted Statement of Financial Accounting Standards (‘‘SFAS’’) No. 128,
‘‘Earnings per Share.’’ Basic earnings per share is computed using the weighted average number of
common shares outstanding during the period. Diluted earnings per share is computed using the weighted
average number of common shares and dilutive potential common shares outstanding during the period.
Dilutive potential common shares consist of employee stock options using the treasury stock method,
unvested restricted stock, and assumed net-share settlement of dilutive put warrants. All earnings per
share amounts for all periods presented have been restated to conform to SFAS No. 128 requirements.
Recent accounting pronouncements
In June 1997, the Financial Accounting Standards Board (the ‘‘FASB’’) issued SFAS No. 130,
‘‘Reporting Comprehensive Income.’’ SFAS No. 130 establishes standards for reporting and displaying
comprehensive income and its components in the financial statements. It does not, however, require a
specific format for the disclosure but requires the Company to display an amount representing total
comprehensive income for the period in its financial statements. The Company will implement SFAS
No. 130 in the first quarter of fiscal year 1999.
Also in June 1997, the FASB issued SFAS No. 131, ‘‘Disclosures About Segments of an Enterprise and
Related Information.’’ SFAS No. 131 establishes standards for the manner in which public companies
report information about operating segments in annual and interim financial statements. The Company is
currently evaluating the operating segment information that it will be required to report. The Company
will be required to implement SFAS No. 131 for its fiscal year 1999.
In October 1997, the American Institute of Certified Public Accountants (the ‘‘AICPA’’) issued
Statement of Position (‘‘SOP’’) 97-2, ‘‘Software Revenue Recognition.’’ SOP 97-2, as amended by SOP
98-4, establishes standards relating to the recognition of all aspects of software revenue. Based on the
Company’s ongoing assessment of the impact SOP 97-2 may have on its consolidated results of operations,
the Company is modifying certain aspects of its business model such that any impact will not be significant.
The Company will adopt SOP 97-2 for its fiscal 1999.
In December 1998, the AICPA issued SOP 98-9, ‘‘Modifications of SOP 97-2, Software Revenue
Recognition, With Respect to Certain Transactions,’’ which amends SOP 97-2 and supercedes SOP 98-4.
The Company will adopt SOP 98-9 in fiscal 2000, with the exception of certain provisions of this SOP that
extend the deferral of the application of certain passages of SOP 97-2 which are effective December 15,
1998. The adoption of SOP 98-9 is not expected to have a significant impact on the Company.
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