Adobe 2003 Annual Report Download - page 44

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Our quarterly revenues and operating results are difficult to forecast and are likely to fluctuate substantially
from quarter to quarter due to a number of factors. These factors include:
• delays in development or shipment of our new products or major new versions of existing products
• any seasonality of technology purchases in our geographical markets
• difficulties in transitions to new business models or markets, including the enterprise and government
markets
• any delays in recognizing revenue on any transaction
• any changes in general economic conditions
• changes in our pricing policies or the policies of our competitors
• changes to our product offering models, including the Creative Suites platform
Our operating results are subject to fluctuations in foreign currency exchange rates. Dramatic fluctuations in
foreign currency exchange rates may have significant financial impact. We attempt to mitigate a portion of these
risks through foreign currency hedging, based on our judgment of the appropriate trade-offs among risk, opportunity
and expense. We have established a hedging program to hedge our exposure to foreign currency exchange rate
fluctuations, primarily the Japanese yen and the euro. We regularly review our hedging program and will make
adjustments based on our judgment. Our hedging activities may not offset more than a portion of the adverse
financial impact resulting from unfavorable movement in foreign currency exchange rates.
We prepare our financial statements in conformity with accounting principles generally accepted in the United
States of America. These principles are subject to interpretation by the American Institute of Certified Public
Accountants (the “AICPA”), the Securities and Exchange Commission (the “SEC”) and various bodies formed to
interpret and create appropriate accounting policies. A change in these policies can have a significant effect on our
reported results and may even retroactively affect previously reported transactions. Our accounting policies that
recently have been or may be affected by changes in the accounting rules are as follows:
• software revenue recognition
• accounting for stock options
• accounting for variable interest entities
• accounting for goodwill and other intangible assets
• accounting for guarantees and indemnities
In particular, new FASB guidelines relating to accounting for goodwill could make our acquisition-related
charges less predictable in any given reporting period. It is possible that in the future, we may incur less frequent,
but larger, impairment charges related to goodwill we have already recorded, as well as goodwill arising out of
potential future acquisitions. See “Goodwill and Purchased and Other Intangible Assets” in Note 1 of our Notes to
Condensed Consolidated Financial Statements for more information on this new FASB pronouncement. 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.
Unanticipated changes in our tax rates could affect our future results of operations. Our future effective tax rates
could be unfavorably affected by unanticipated decreases in the amount of revenue or earnings in countries with low
statutory tax rates, changes in the valuation of our deferred tax assets and liabilities, or by changes in tax laws or the
interpretation of tax laws. In addition, we are subject to the continuous examination of our income tax returns by the