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ADOBE SYSTEMS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
72
The aggregate fair value of foreign currency contracts in net asset positions as of November 28, 2014 and November 29,
2013 was $33.0 million and $11.9 million, respectively. These amounts represent the maximum exposure to loss at the reporting
date as a result of all of the counterparties failing to perform as contracted. These exposures could be reduced by up to $0.7 million
and $1.1 million, respectively from liabilities included in master netting arrangements with those same counterparties.
Credit risk in receivables is limited to OEMs, dealers and distributors of hardware and software products to the retail market,
customers to whom we license software directly and our SaaS offerings. We are also experiencing elevated delinquency and bad
debt write-offs related to our receivables assumed in business combinations. A credit review is completed for our new distributors,
dealers and OEMs. We also perform ongoing credit evaluations of our customers’ financial condition and require letters of credit
or other guarantees, whenever deemed necessary. The credit limit given to the customer is based on our risk assessment of their
ability to pay, country risk and other factors and is not contingent on the resale of the product or on the collection of payments
from their customers. We also purchase credit insurance to mitigate credit risk in some foreign markets where we believe it is
warranted. If we license our software or provide SaaS services to a customer where we have a reason to believe the customer’s
ability to pay is not probable, due to country risk or credit risk, we will not recognize the revenue. We will revert to recognizing
the revenue on a cash basis, assuming all other criteria for revenue recognition has been met.
See Note 18 for information regarding our significant customers.
We derive a significant portion of our OEM PostScript and Other licensing revenue from a small number of OEMs. Our
OEMs on occasion seek to renegotiate their royalty arrangements. We evaluate these requests on a case-by-case basis. If an
agreement is not reached, a customer may decide to pursue other options, which could result in lower licensing revenue for us.
Recent Accounting Pronouncements Not Yet Effective
On May 28, 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, requiring an entity to
recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The
updated standard will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective and permits
the use of either the retrospective or cumulative effect transition method. Early adoption is not permitted. The updated standard
becomes effective for us in the first quarter of fiscal 2018. We have not yet selected a transition method and we are currently
evaluating the effect that the updated standard will have on our consolidated financial statements and related disclosures.
With the exception of the new revenue standard discussed above, there have been no new accounting pronouncements not
yet effective that have significance, or potential significance, to our Consolidated Financial Statements.
NOTE 2. ACQUISITIONS
Fiscal 2014 Acquisition
During fiscal 2014, we completed a business acquisition which was not material to our Consolidated Financial Statements.
Subsequent to November 28, 2014, we entered into a a definitive agreement to acquire privately-held Fotolia, a leading
marketplace for royalty-free photos, images, graphics and HD video, for approximately $800 million in cash. The transaction is
subject to customary regulatory approvals and closing conditions and is expected to close in the first quarter of our fiscal 2015.
Following the closing, we intend to integrate Fotolia into our Digital Media reportable segment for financial reporting purposes.
Fiscal 2013 Acquisitions
Neolane
On July 22, 2013, we completed our acquisition of privately held Neolane, a leader in cross-channel campaign management
technology. During the third quarter of fiscal 2013, we began integrating Neolane into our Digital Marketing reportable segment.
Neolane brings a platform for automation and execution of marketing campaigns across the web, e-mail, social, mobile, call center,
direct mail, point of sale and other emerging channels which will drive consistent brand experiences and personalized campaigns
for our customers.
Under the acquisition method of accounting, the total final purchase price was allocated to Neolane’s net tangible and
intangible assets based upon their estimated fair values as of July 22, 2013. The total final purchase price for Neolane was $616.7