Adobe 2001 Annual Report Download - page 67

ADOBE SYSTEMS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In thousands, except share and per share data)
Note 1. Significant Accounting Policies (Continued)
other-than-temporary decline exists in one of our marketable equity securities, it is our policy to write
down these equity investments to the market value and record the related writedown as an investment loss
on our consolidated statements of income.
Foreign Currency Translation
We translate assets and liabilities of foreign subsidiaries, whose functional currency is the local
currency, at exchange rates in effect at the balance sheet date. We translate revenues and expenses at the
monthly average rates of exchange prevailing during the year. We include the adjustment resulting from
translating the financial statements of such foreign subsidiaries in accumulated other comprehensive
income, which is reflected as a separate component of stockholders’ equity. Foreign currency transaction
gains or losses are reported in interest and other income. For the years ended November 30, 2001 and
December 1, 2000, we reported foreign exchange transaction losses of $3.2 million and $1.6 million,
respectively. We also reported net gains on our foreign currency hedges of these transactions of
$3.2 million and $0.5 million for fiscal years 2001 and 2000, respectively.
Property and Equipment
We record property and equipment at cost. Depreciation and amortization are calculated using the
straight-line method over the shorter of the estimated useful lives (thirty-five years for buildings; two to
seven years for furniture and equipment) or lease terms (five to ten years for leasehold improvements) of
the respective assets. We also capitalize certain costs related to our website development in accordance
with Statement of Position 98-1 (‘‘SOP 98-1’’), ‘‘Accounting for the Costs of Computer Software Developed
or Obtained for Internal Use.’’ Amortization on a straight-line basis begins once the website is ready for its
intended use.
Other Assets
Other assets includes goodwill, purchased technology, certain other intangible assets, and long-term
investments.
Goodwill, purchased technology, and certain other intangible assets are stated at cost less
accumulated amortization. We record amortization utilizing the straight-line method over the estimated
useful lives of the respective assets, generally up to thirteen years. Capitalization of computer software
development costs, when material, begins upon the establishment of technological feasibility, which is
generally the completion of a working prototype that has been certified as having no critical bugs and is a
release candidate. To date, software development costs incurred between completion of a working
prototype and general availability of the related product have not been material.
Our long-term investments include direct investments and indirect investments in privately-held
companies. We own limited partnership interests in four venture capital limited partnerships, Adobe
Ventures L.P.; Adobe Ventures II, L.P.; Adobe Ventures III, L.P., and Adobe Ventures IV, L.P. (collectively
‘‘Adobe Ventures’’), that invest in early stage companies with innovative technologies. In addition to the
potential for financial returns, our venture activities increase our knowledge of emerging markets and
technologies, as well as expand our ecosystem of Adobe products and services. The partnerships are
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