Adobe 2010 Annual Report Download - page 90

Download and view the complete annual report

Please find page 90 of the 2010 Adobe annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 144

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144

ADOBE SYSTEMS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
90
(in thousands)
2010
2009
2008
Beginning balance ...................................................................
$
15,225
$
4,128
$
4,398
Increase due to acquisition ......................................................
—
9,421
—
Charged to operating expenses ...............................................
3,134
2,841
4,414
Preference claim, charged (credited) to operating expense .....
1,000
(1,000
)
(2,000
)
Deductions(*) ...........................................................................
(4,126
)
(165
)
(2,684
)
Ending balance ........................................................................
$
15,233
$
15,225
$
4,128
_________________________________________
(*) Deductions related to the allowance for doubtful accounts represent amounts written off against the allowance, less
recoveries.
Property and Equipment
We record property and equipment at cost less accumulated depreciation and amortization. Property and equipment are
depreciated using the straight-line method over their estimated useful lives ranging from 1 to 5 years for computers and
equipment as well as server hardware under capital leases, 1 to 6 years for furniture and fixtures and up to 35 years for
buildings. Leasehold improvements are amortized using the straight-line method over the lesser of the remaining respective
lease term or useful lives.
Goodwill, Purchased Intangibles and Other Long-Lived Assets
We review our goodwill for impairment annually, or more frequently, if facts and circumstances warrant a review. We
completed our annual impairment test in the second quarter of fiscal 2010 and determined that there was no impairment.
Goodwill is assigned to one or more reporting segments on the date of acquisition. We evaluate goodwill for impairment
by comparing the fair value of each of our reporting segments to its carrying value, including the associated goodwill. To
determine the fair values, we use the market approach based on comparable publicly traded companies in similar lines of
businesses and the income approach based on estimated discounted future cash flows. Our cash flow assumptions consider
historical and forecasted revenue, operating costs and other relevant factors.
We amortize intangible assets with finite lives over their estimated useful lives and review them for impairment
whenever an impairment indicator exists. We continually monitor events and changes in circumstances that could indicate
carrying amounts of our long-lived assets, including our intangible assets may not be recoverable. When such events or
changes in circumstances occur, we assess recoverability by determining whether the carrying value of such assets will be
recovered through the undiscounted expected future cash flows. If the future undiscounted cash flows are less than the
carrying amount of these assets, we recognize an impairment loss based on the excess of the carrying amount over the fair
value of the assets. We did not recognize any intangible asset impairment charges in fiscal 2010, 2009 or 2008.
Our intangible assets are amortized over their estimated useful lives of 1 to 13 years as shown in the table below.
Amortization is based on the pattern in which the economic benefits of the intangible asset will be consumed.
Weighted Average
Useful Life (years)
Purchased technology ..................................................................................................................................
6
Localization .................................................................................................................................................
1
Trademarks ..................................................................................................................................................
8
Customer contracts and relationships ..........................................................................................................
10
Other intangibles ..........................................................................................................................................
2
Software Development Costs
Capitalization of software development costs for software to be sold, leased, or otherwise marketed begins upon the
establishment of technological feasibility, which is generally the completion of a working prototype that has been certified as
having no critical bugs and is a release candidate. Amortization begins once the software is ready for its intended use,
generally based on the pattern in which the economic benefits will be consumed. To date, software development costs
incurred between completion of a working prototype and general availability of the related product have not been material.