Adobe 2005 Annual Report Download - page 39

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39
anticipate cost saving synergies. In addition, we expect to incur estimated restructuring charges of $20 million to
$25 million in the next fiscal year, primarily in the first quarter. Coinciding with the integration of Macromedia and
the start of our 2006 fiscal year, we changed the reporting of our principal business segments to be aligned with our
market opportunities and how we manage our various businesses. The discussions in this section of the Annual
Report on Form 10-K, as well as the financial statements contained herein, relate to Adobe as a standalone entity
and do not reflect the impact of the acquisition.
BUSINESS OVERVIEW
Founded in 1982, Adobe Systems Incorporated is one of the largest and most diversified software companies in
the world. We offer a line of creative, business and mobile software and services used by high-end consumers,
creative professionals, designers, knowledge workers, OEM partners, developers and enterprises for creating,
managing, delivering and engaging with compelling content and experiences across multiple operating systems,
devices and media. We distribute our products through a network of distributors and dealers, VARs, systems
integrators, ISVs and OEMs; direct to end users; and through our own Web site at www.adobe.com. We also license
our technology to major hardware manufacturers, software developers and service providers and we offer integrated
software solutions to businesses of all sizes. We have operations in the Americas, EMEA and Asia. Our software
runs on Microsoft Windows, Apple OS, Linux, UNIX and various non-personal computer platforms, depending on
the product.
CRITICAL ACCOUNTING ESTIMATES
In preparing our consolidated financial statements, we make assumptions, judgments and estimates that can
have a significant impact on amounts reported in our consolidated financial statements. We base our assumptions,
judgments and estimates on historical experience and various other factors that we believe to be reasonable under
the circumstances. Actual results could differ materially from these estimates under different assumptions or
conditions. On a regular basis we evaluate our assumptions, judgments and estimates and make changes
accordingly. We also discuss our critical accounting estimates with the Audit Committee of the Board of Directors.
We believe that the assumptions, judgments and estimates involved in the accounting for revenue recognition and
income taxes have the greatest potential impact on our consolidated financial statements, so we consider these to be
our critical accounting policies. We discuss below the critical accounting estimates associated with these policies.
Historically, our assumptions, judgments and estimates relative to our critical accounting policies have not differed
materially from actual results. For further information on our critical accounting policies, see the discussion in the
section titled “Recent Accounting Pronouncements” below and Note 1 of our Notes to Consolidated Financial
Statements.
Revenue Recognition
We recognize revenue in accordance with current U.S. generally accepted accounting principles that have been
prescribed for the software industry. Revenue recognition requirements in the software industry are very complex
and are subject to change. Our revenue recognition policy is one of our critical accounting policies because revenue
is a key component of our results of operations and is based on complex rules which require us to make judgments
and estimates. In applying our revenue recognition policy we must determine which portions of our revenue are
recognized currently and which portions, if any, must be deferred. In order to determine current and deferred
revenue, we make judgments and estimates with regard to future deliverable products and services and the
appropriate pricing for those products and services. Our assumptions and judgments regarding future products and
services could differ from actual events, thus materially impacting our financial position and results of operations.