Adobe 2000 Annual Report Download - page 59

In May 2000, the EITF reached a consensus on Issue No. 00-14, “Accounting for Coupons,
Rebates, and Discounts.” Issue No. 00-14 addresses the recognition, measurement, and
income statement classification for sales incentives offered voluntarily by a vendor without
charge to customers that can be used in, or that are exercisable by a customer as a result of,
a single exchange transaction. We adopted Issue No. 00-14 beginning December 2, 2000.
The adoption of Issue No. 00-14 did not have a material impact on our financial position
or results of operations.
Reclassifications Certain reclassifications have been made to the fiscal 1999 and 1998
consolidated statements of cash flows and industry segment and geographic information
to conform to our fiscal 2000 presentation. These reclassifications did not impact total
cash flows or industry segment and geographic information in fiscal 1999 and 1998.
NOTE 2. ACQUISITIONS
During the fourth quarter of fiscal 2000, we acquired Boston, Massachusetts–based
Glassbook, Inc. (“Glassbook”). Glassbook is a developer of consumer and commercial
software for the eBook market, automating the supply chain for publishers, booksellers,
distributors, and libraries. The acquisition was accounted for using the purchase method
of accounting in accordance with Accounting Principles Board Opinion No. 16 (“APB
16”), “Business Combinations.” The purchase price of the acquisition was approximately
$24.4 million cash plus additional liabilities assumed of approximately $3.6 million.
Based on an independent appraiser’s valuation, $0.5 million of the purchase price was
allocated to in-process research and development due to the state of the development
and the uncertainty of the technology and expensed upon acquisition. The remaining
$27.5 million was allocated $26.9 million to goodwill, $0.4 million to intangible assets,
and $0.2 million to other assets. The goodwill and intangible assets are amortized on a
straight-line basis over a three-year period.
During the fourth quarter of fiscal 1999, we acquired substantially all of the assets, con-
sisting of intellectual property, of Attitude Software, LLC (“Attitude Software”). The
acquisition was accounted for using the purchase method of accounting in accordance
with APB 16, and substantially all of the purchase price of $3.0 million cash was allocated
to in-process research and development and expensed at the time of acquisition. The
ongoing project at Attitude Software at the time of the purchase included the develop-
ment of the 3D Anarchy authoring product. We purchased this technology to incorporate
it into future versions of existing Adobe products to further enhance the feature sets and
user interface contained within the products. At the date we acquired Attitude Software, it
was estimated that 50% of the development effort had been completed and that the
remaining 50% of the development effort would take approximately eighteen months to
complete and would cost $1.8 million. The efforts required to complete the development
of the technology primarily related to additional design efforts to integrate the technology
into several of our products, finalization of coding, and completion testing. The value of
the in-process technology was determined by estimating the projected net cash flows
related to products the technology will be integrated into, including costs to complete the
development of the technology and the future net revenues that may be earned from the
products, excluding the value attributed to the existing technology with the products prior
to the integration of the purchased technology. These cash flows were discounted back to
their net present value using a discount rate of 20%, exclusive of the value attributable to
the use of the in-process technologies in future products.
Additionally, during the fourth quarter of fiscal 1999, we acquired substantially all of the
assets, consisting of intellectual property, of Photomerge Technology. In connection with
the acquisition of Photomerge Technology, 100% of the purchase price, or $600,000 cash,
was allocated to in-process research and development, due to the state of completion and
the uncertainty of the technology.
On December 22, 1998, we acquired substantially all of the assets, consisting of intellectual
property and a minimal amount of fixed assets, of both GoLive Systems, Inc., a Delaware
corporation, and GoLive Systems GmbH and Co. KG, a German limited partnership
(together “GoLive Systems”). GoLive Systems creates Web site development software,
which enables users to effectively use the Internet for professional publishing and
communication. The acquisition was accounted for under the purchase method of