Adobe 2014 Annual Report Download - page 29

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29
in jurisdictions where our income is earned, by changes in, or our interpretation of, tax rules and regulations in the jurisdictions
in which we do business, by unanticipated decreases in the amount of earnings in countries with low statutory tax rates, by lapses
of the availability of the U.S. research and development tax credit, or by changes in the valuation of our deferred tax assets and
liabilities. The United States, countries in the European Union and other countries where we do business have been considering
changes in relevant tax, accounting and other laws, regulations and interpretations, including changes to tax laws applicable to
corporate multinationals such as Adobe. These potential changes could adversely affect our effective tax rates or result in other
costs to us.
In addition, we are subject to the continual examination of our income tax returns by the U.S. Internal Revenue Service
(“IRS”) and other domestic and foreign tax authorities, including a current examination by the IRS of our fiscal 2010, 2011 and
2012 tax returns. These tax examinations are expected to focus on our intercompany transfer pricing practices as well as other
matters. We regularly assess the likelihood of outcomes resulting from these examinations to determine the adequacy of our
provision for income taxes and have reserved for potential adjustments that may result from the current examinations. There can
be no assurance that the final determination of any of these examinations will not have an adverse effect on our operating results
and financial position.
If we are unable to recruit and retain key personnel our business may be harmed.
Much of our future success depends on the continued service and availability of our senior management. These individuals
have acquired specialized knowledge and skills with respect to Adobe. The loss of any of these individuals could harm our business,
especially in the event that we have not been successful in developing adequate succession plans. Our business is also dependent
on our ability to retain, hire and motivate talented, highly skilled personnel across all levels of our organization. Experienced
personnel in the information technology industry are in high demand and competition for their talents is intense in many areas
where our employees are located. If we are unable to continue to successfully attract and retain key personnel, our business may
be harmed. Effective succession planning is also a key factor for our long-term success. Our failure to enable the effective transfer
of knowledge and facilitate smooth transitions of our key employees could adversely affect our long-term strategic planning and
execution.
We believe that a critical contributor to our success to date has been our corporate culture, which we have built to foster
innovation, teamwork and employee satisfaction. As we grow, including from the integration of employees and businesses acquired
in connection with previous or future acquisitions, we may find it difficult to maintain important aspects of our corporate culture,
which could negatively affect our ability to retain and recruit personnel who are essential to our future success.
Our investment portfolio may become impaired by deterioration of the capital markets.
Our cash equivalent and short-term investment portfolio as of November 28, 2014 consisted of corporate bonds and
commercial paper, U.S. agency securities and U.S. Treasury securities, money market mutual funds, municipal securities, time
deposits and foreign government securities. We follow an established investment policy and set of guidelines to monitor and help
mitigate our exposure to interest rate and credit risk. The policy sets forth credit quality standards and limits our exposure to any
one issuer, as well as our maximum exposure to various asset classes.
Should financial market conditions worsen in the future, investments in some financial instruments may pose risks arising
from market liquidity and credit concerns. In addition, any deterioration of the capital markets could cause our other income and
expense to vary from expectations. As of November 28, 2014, we had no material impairment charges associated with our short-
term investment portfolio, and although we believe our current investment portfolio has little risk of material impairment, we
cannot predict future market conditions or market liquidity, or credit availability, and can provide no assurance that our investment
portfolio will remain materially unimpaired.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.