Adobe 2009 Annual Report Download - page 56

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and estimate our future cash flows. Based on these key assumptions, judgments and estimates, we determine whether we
need to record an impairment charge to reduce the value of the asset carried on our balance sheet to its estimated fair value.
Assumptions, judgments and estimates about future values are complex and often subjective. They can be affected by a
variety of factors, including external factors such as industry and economic trends, and internal factors such as changes in our
business strategy or our internal forecasts. Although we believe the assumptions, judgments and estimates we have made in
the past have been reasonable and appropriate, different assumptions, judgments and estimates could materially affect our
reported financial results.
We completed our annual impairment test in the second quarter of fiscal 2009 and determined there was no impairment.
We currently believe that there is no significant risk of future material goodwill impairment in any of our reporting units.
Accounting for Income Taxes
We use the asset and liability method of accounting for income taxes. Under this method, income tax expense is
recognized for the amount of taxes payable or refundable for the current year. In addition, deferred tax assets and liabilities
are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax
bases of assets and liabilities, and for operating losses and tax credit carryforwards. Management must make assumptions,
judgments and estimates to determine our current provision for income taxes and also our deferred tax assets and liabilities
and any valuation allowance to be recorded against a deferred tax asset.
Our assumptions, judgments and estimates relative to the current provision for income taxes take into account current
tax laws, our interpretation of current tax laws and possible outcomes of current and future audits conducted by foreign and
domestic tax authorities. We have established reserves for income taxes to address potential exposures involving tax
positions that could be challenged by tax authorities. In addition, we are subject to the continual examination of our income
tax returns by the IRS and other domestic and foreign tax authorities, including a current examination by the IRS for our
fiscal 2005, 2006 and 2007 tax returns. These examinations are expected to focus on our intercompany transfer pricing
practices as well as other matters. Although we believe our assumptions, judgments and estimates are reasonable, changes in
tax laws or our interpretation of tax laws and the resolution of the current and any future tax audits could significantly impact
the amounts provided for income taxes in our consolidated financial statements.
Our assumptions, judgments and estimates relative to the value of a deferred tax asset take into account predictions of
the amount and category of future taxable income, such as income from operations or capital gains income. Actual operating
results and the underlying amount and category of income in future years could render our current assumptions, judgments
and estimates of recoverable net deferred taxes inaccurate. Any of the assumptions, judgments and estimates mentioned
above could cause our actual income tax obligations to differ from our estimates, thus materially impacting our financial
position and results of operations.
RESULTS OF OPERATIONS
Overview of 2009
Effective in the first quarter of fiscal 2009, our former Mobile and Devices Solutions segment, which was integrated
into our Platform business unit to better align our engineering and marketing efforts, is now reported as part of the Platform
segment. Prior year information has been updated to reflect the integration of these business units.
During fiscal 2009, our business was broadly impacted by the global economic recession and generally weak macro-
economic environment. This resulted in a significant year-over-year decline in our revenue and earnings results.
In our Creative Solutions segment, revenue decreased by 18% during fiscal 2009 as compared to fiscal 2008. We
attribute this decline to reduced adoption of our CS4 family of products during the year, as the global financial crisis
significantly affected demand in the creative professional end user market. All major creative product categories declined on
a year-over-year basis.
Our Business Productivity Solutions business declined 19% in fiscal 2009 when compared to fiscal 2008. A decline in
demand primarily due to the macro-economic environment with our Acrobat product family – which makes up the majority
of revenue in our Knowledge Worker segment – was the primary factor for this decline. In our Enterprise business, our
LiveCycle revenue declined 7% when compared to revenue achieved in fiscal 2008. We attribute this smaller percentage
decline in comparison to our other segments to focused execution by our sales teams and the large market opportunities these
product solutions address.