Adobe 2003 Annual Report Download - page 68

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we invest in. 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
write-down 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.
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 do not currently have any capitalized Web site development costs. However, it is
our policy to capitalize certain costs related to Web site 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 Web site is ready for its intended use.
Goodwill and Purchased and Other Intangibles
In accordance with Statement of Financial Accounting Standards No. 142 (“SFAS 142”), “Goodwill
and Other Intangible Assets,” goodwill and purchased and other intangibles with indefinite useful lives are
no longer amortized but are reviewed periodically for impairment. With the adoption of SFAS 142 in the
first quarter of fiscal 2003, we discontinued amortizing the remaining balances of goodwill and workforce-
in-place.
The provisions of SFAS 142 require that a two-step test be performed to assess goodwill for
impairment. First, the fair value of each reporting unit is compared to its carrying value. If the fair value
exceeds the carrying value, goodwill is not impaired and no further testing is performed. The second step is
performed if the carrying value exceeds the fair value. The implied fair value of the reporting unit’s
goodwill must be determined and compared to the carrying value of the goodwill. If the carrying value of a
reporting unit’s goodwill exceeds its implied fair value, an impairment loss equal to the difference will be
recorded.
Upon adoption of SFAS 142, we completed our transitional and annual goodwill impairment tests as of
November 30, 2002 and April 1, 2003, respectively, and determined that the carrying amount of goodwill
was not impaired. We will continue to perform our goodwill impairment review annually or more
frequently if facts and circumstances warrant a review.
SFAS 142 also requires that intangible assets with definite lives be amortized over their estimated
useful life and reviewed for impairment in accordance with SFAS 144. We are currently amortizing
acquired intangible assets with definite lives over periods from one to five years and the amortization
expense is primarily classified as cost of product revenue in our consolidated statements of income.