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Table of Contents
ADOBE SYSTEMS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
70
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.
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
On November 20, 2015, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2015-17, Balance Sheet
Classification of Deferred Taxes, requiring all deferred tax assets and liabilities, and any related valuation allowance, to be classified
as noncurrent on the balance sheet. The classification change for all deferred taxes as noncurrent simplifies entities’ processes as
it eliminates the need to separately identify the net current and net noncurrent deferred tax asset or liability in each jurisdiction
and allocate valuation allowances. We elected to prospectively adopt the accounting standard in the beginning of our fourth quarter
of fiscal 2015. Prior periods in our Consolidated Financial Statements were not retrospectively adjusted.
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. In August 2015, the FASB issued ASU No. 2015-14,
Revenue from Contracts with Customers: Deferral of the Effective Date, which deferred the effective date of the new revenue
standard for periods beginning after December 15, 2016 to December 15, 2017, with early adoption permitted but not earlier than
the original effective date. Accordingly, the updated standard is effective for us in the first quarter of fiscal 2019. 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 that
have significance, or potential significance, to our Consolidated Financial Statements.
NOTE 2. ACQUISITIONS
Fotolia
On January 27, 2015, we completed our acquisition of privately held Fotolia, a leading marketplace for royalty-free photos,
images, graphics and HD videos. During the first quarter of fiscal 2015, we began integrating Fotolia into our Digital Media
reportable segment.
Under the acquisition method of accounting, the total final purchase price was allocated to Fotolia's net tangible and intangible
assets based upon their estimated fair values as of January 27, 2015. During fiscal 2015, we recorded immaterial purchase accounting
adjustments based on changes to management’s estimates and assumptions in regards to assumed intangible assets, calculation of
deferred tax assets, liabilities and equity awards. The total final purchase price for Fotolia was $807.5 million of which $745.1
million was allocated to goodwill that was non-deductible for tax purposes, $204.4 million to identifiable intangible assets and
$142.0 million to net liabilities assumed.
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.