Adobe 2002 Annual Report Download - page 110

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79
investments in equity securities at estimated fair market value and unrealized gains and losses are included in
investment gain (loss) on our consolidated statements of income. The stock of a number of technology investments
held by the limited partnerships at November 29, 2002 is not publicly traded, and, therefore, there is no established
market for their securities. In order to determine the fair market value of these investments, we use the most recent
round of financing involving new non-strategic investors or estimates made by Granite Ventures based on their
assessment of the current market value. It is our policy to review the fair value of these investments held by Adobe
Ventures, as well as our direct investments, on a regular basis to evaluate the carrying value of the investments in
these companies. This policy includes, but is not limited to, reviewing each companies’ cash position, financing
needs, earnings/revenue outlook, operational performance, management/ownership changes, and competition. The
evaluation process is based on information that we request from these privately held companies. This information is
not subject to the same disclosure regulations as U.S. publicly traded companies, and as such, the basis for these
evaluations is subject to the timing and the accuracy of the data received from these companies. If we believe that
the carrying value of a company is carried at an amount in excess of fair value, it is our policy to record a reserve in
addition to our equity method of accounting.
We recognize realized gains and losses upon sale or maturity of investments using the specific identification
method. 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 $(13.1) million, $(59.9) million, and $33.3 million, respectively,
related to our investments in Adobe Ventures and our cost method investments.
Impairment of Long-lived Assets
We currently evaluate our long-lived assets, including goodwill and certain identifiable intangibles, in
accordance with the provisions of Statement of Financial Accounting Standards No. 121 (“SFAS No. 121”),
“Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of,” for
impairment whenever events or changes in circumstances indicate that the carrying amount of such assets or
intangibles may not be recoverable. We consider factors such as significant changes in the business climate and
projected cash flows from the respective asset. Impairment losses are measured as the amount by which the carrying
amount of the asset exceeds its fair value.
During the fourth quarter of fiscal 2002, we recognized a $6.8 million goodwill impairment charge for the
remaining book value related to the Glassbook acquisition. This impairment charge is presented under amortization
and impairment of goodwill and purchased intangibles on our consolidated statements of income. The impairment
charge was determined based on discounted future cash flows.
During the third and fourth quarter of fiscal 2002, we recognized a $6.3 million pre-tax impairment charge for
capitalized Adobe Design Team (formerly Adobe Studio) hosted server development costs. The impairment charge
was recorded on our consolidated statement of income under cost of products revenue. The impairment charge was
determined based on discounted future cash flows. For segment reporting purposes, the charge was included in our
Cross-media Publishing segment.
In August 2001, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial
Accounting Standards No. 144 (“SFAS No. 144”), "Accounting for the Impairment or Disposal of Long-Lived
Assets." This Statement addresses financial accounting and reporting for the impairment or disposal of long-lived
assets and supersedes SFAS No. 121 and the accounting and reporting provisions of Accounting Principles Board
Opinion No. 30 (“APB No. 30”), "Reporting the Results of Operations for a Disposal of a Segment of a Business."
We will adopt SFAS No. 144 beginning in our fiscal year 2003. We do not expect the adoption of SFAS No. 144 to
have a material impact on our financial position or results of operations.
Stock Split
Adobe’s Board of Directors approved a two-for-one stock split in the form of stock dividends of our common
stock to stockholders effected October 24, 2000. All share and per share amounts referred to in the consolidated
financial statements have been adjusted to reflect this stock split.