Adobe 2002 Annual Report Download - page 108

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77
ADOBE SYSTEMS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share data)
Note 1. Significant Accounting Policies
Operations
Founded in 1982, Adobe Systems Incorporated (“Adobe” or the “Company”) offers a line of software for
consumers, businesses, and creative professional customers. Our products enable customers to create, manage and
deliver visually rich, compelling and reliable content. We license our technology to major hardware manufacturers,
software developers, and service providers, and we offer integrated software solutions to businesses of all sizes. We
distribute our products through a network of distributors and dealers, value-added resellers (“VARs”), systems
integrators, and original equipment manufacturers (“OEMs”); direct to end users; and through our own website at
www.adobe.com. We have operations in the Americas; Europe, Middle East, and Africa (“EMEA”); and Asia. Our
software runs on Microsoft Windows, Apple Macintosh, Linux, UNIX, Palm OS, Pocket PC, and
Symbian platforms.
Fiscal Year
Our fiscal year is a 52/53-week year ending on the Friday closest to November 30.
Basis of Consolidation
The accompanying consolidated financial statements include those of Adobe and our subsidiaries, after
elimination of all intercompany accounts and transactions.
Use of Estimates
In the preparation of financial statements in conformity with accounting principles generally accepted in the
United States of America, we must make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent liabilities, at the date of the financial statements, and reported amounts of
revenues and expenses during the reporting period. Actual results could differ from those estimates.
Cash Equivalents and Short-term Investments
Cash equivalents consist of instruments with maturities of three months or less at the time of purchase.
We classify all of our cash equivalents and short-term investments that are free of trading restrictions or become
free of trading restrictions within one year as “available-for-sale.” We carry these investments at fair value, based on
quoted market prices. Unrealized gains and losses, net of taxes, are included in accumulated other comprehensive
income (loss), which is reflected as a separate component of stockholders’ equity. Gains are recognized when
realized in our consolidated statements of income. Losses are recognized as realized or when we have determined
that an other-than-temporary decline in fair value has occurred.
It is our policy to review our equity holdings on a regular basis to evaluate whether or not any security has
experienced an other-than-temporary decline in fair value. Our policy includes, but is not limited to, reviewing each
of the companies’ cash position, earnings/revenue outlook, stock price performance over the past six months,
liquidity and management/ownership. If we believe that an 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.
During fiscal 2002, 2001, and 2000, we recorded investment gains (losses) of $(17.2) million, $(93.4) million,
and $14.3 million, respectively, of which, $(11.3) million, $(53.1) million, and $(26.3) million, respectively, related
to other-than-temporary declines of our short-term investments.