Adobe 2006 Annual Report Download - page 43

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43
integration of Macromedia and the start of our 2006 fiscal year, we changed the reporting of our 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/A, as well as the financial statements contained herein, reflect the impact of
the acquisition. See Note 2 for further information regarding this 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, stock-based compensation, goodwill and income taxes have the greatest potential impact on our
consolidated financial statements. These areas are key components of our results of operations and are based on
complex rules which require us to make judgments and estimates, 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 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. 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. In addition, we must estimate certain royalty revenue
amounts due to the timing of securing information from our customers. Our assumptions and judgments regarding
future products and services as well as our estimates of royalty revenues could differ from actual events, thus
materially impacting our financial position and results of operations.