Adobe 2000 Annual Report Download - page 42

15
on our reported results and may even affect the reporting of transactions completed
before a change is announced. Accounting policies affecting many other aspects of our
business, including:
• rules relating to software revenue recognition
• purchase and pooling-of-interests accounting for business combinations
• the valuation of in-process research and development
• employee stock purchase plans
• stock option grants
• goodwill amortization
have recently been revised or are under review by one or more of these groups. Changes
to these rules or the questioning of current practices may have a significant adverse effect
on our reported financial results or in the way in which we conduct our business.
Due to the factors noted earlier, our future earnings and stock price may be subject to
significant volatility, particularly on a quarterly basis. Any shortfall in revenue or earnings,
or any delay in the release of any product or upgrade, compared to analysts’ or investors’
expectations, could cause, and has caused in the past, an immediate and significant
decline in the trading price of our common stock. Additionally, we may not learn of such
shortfalls or delays until late in the fiscal quarter, which could result in an even more
immediate and greater decline in the trading price of our common stock. Finally, we
participate in a highly dynamic industry. In addition to factors specific to us, changes in
analysts’ earnings estimates for us or our industry and factors affecting the corporate envi-
ronment, our industry, or the securities markets in general will often result in significant
volatility of our common stock price.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1999, the Financial Accounting Standards Board (the “FASB”) implemented SFAS
133, “Accounting for Derivative Instruments and Hedging Activities,” as amended by SFAS
137, “Accounting for Derivative Instruments and Hedging Activities—Deferral of the
Effective Date of FASB Statement No. 133,” and SFAS 138, “Accounting for Certain
Derivative Instruments and Certain Hedging Activities.” We adopted SFAS 133 beginning
December 2, 2000. SFAS 133 establishes accounting and reporting standards for deriva-
tive financial instruments and hedging activities and requires us to recognize all
derivatives as either assets or liabilities on the balance sheet and measure them at fair
value. Gains and losses resulting from changes in fair value would be accounted for
depending on the use of the derivative and whether it is designated and qualifies for
hedge accounting. The adoption of SFAS 133 is not expected to result in any material
transition adjustment to earnings in the first quarter of fiscal 2001.
In December 1999, the SEC issued Staff Accounting Bulletin No. 101 (“SAB 101”),
“Revenue Recognition in Financial Statements.” SAB 101 summarizes certain of the SEC’s
views in applying accounting principles generally accepted in the United States of
America to revenue recognition in financial statements. In March 2000, the SEC issued
SAB 101A, which delayed the implementation date of SAB 101. In June 2000, the SEC
issued SAB 101B, which further delayed the implementation date of SAB 101. We adopted
SAB 101 beginning December 2, 2000. The adoption of SAB 101 did not have a material
impact on our financial position or results of operations.
In March 2000, the FASB issued Financial Interpretation No. 44 (“FIN 44”), “Accounting
for Certain Transactions Involving Stock Compensation—an Interpretation of APB No.
25.” FIN 44 clarifies the application of APB 25 for certain issues, including (a) the
definition of employee for purposes of applying APB 25, (b) the criteria for determining
whether a plan qualifies as a noncompensatory plan, (c) the accounting consequence of
14