Adobe Inc. (NASDAQ:ADBE)

Goodwill is assigned to one or more reporting segments on the date of acquisition. Adobe reviews the goodwill for impairment annually during the second quarter of each fiscal year and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of any one of the reporting units below its respective carrying amount. In performing the goodwill impairment test, Adobe first performs a qualitative assessment, which requires that Adobe considers events or circumstances including macroeconomic conditions, industry and market considerations, cost factors, overall financial performance, changes in management or key personnel, changes in strategy, changes in customers, changes in the composition or carrying amount of a reporting segment’s net assets and changes in the stock price. If, after assessing the totality of events or circumstances, Adobe determines that it is more likely than not that the fair values of the reporting segments are greater than the carrying amounts, then the quantitative goodwill impairment test is not performed.

If the qualitative assessment indicates that the quantitative analysis should be performed, Adobe then evaluates goodwill for impairment by comparing the fair value of each of the reporting segments to its carrying value, including the associated goodwill. To determine the fair values, Adobe uses the equal weighting of 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. Adobe’s cash flow assumptions consider historical and forecasted revenue, operating costs and other relevant factors.

Adobe completed the annual goodwill impairment test in the second quarter of fiscal 2019. Adobe determined, after performing a qualitative review of each reporting segment, that it is more likely than not that the fair value of each of the reporting segments substantially exceeds the respective carrying amounts. Accordingly, there was no indication of impairment and the quantitative goodwill impairment test was not performed. Adobe did not identify any events or changes in circumstances since the performance of the annual goodwill impairment test that would require Adobe to perform another goodwill impairment test during the fiscal year.

Adobe amortizes intangible assets with finite lives over their estimated useful lives and reviews them for impairment whenever an impairment indicator exists. Adobe continually monitors events and changes in circumstances that could indicate carrying amounts of the long-lived assets, including the intangible assets, may not be recoverable. When such events or changes in circumstances occur, Adobe assesses 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, Adobe recognizes an impairment loss based on any excess of the carrying amount over the fair value of the assets. Adobe did not recognize any intangible asset impairment charges in fiscal 2019, 2018 or 2017.

During fiscal 2019, Adobe’s intangible assets were amortized over their estimated useful lives ranging from 1 to 15 years. Amortization is based on the pattern in which the economic benefits of the intangible asset will be consumed or on a straight-line basis when the consumption pattern is not apparent. The weighted average useful lives of Adobe’s intangible assets were as follows:

Source: 10-K (filing date: 2020-01-21).

Adobe Inc., balance sheet: goodwill and intangible assets

US$ in thousands

Based on: 10-K (filing date: 2020-01-21), 10-K (filing date: 2019-01-25), 10-K (filing date: 2018-01-22), 10-K (filing date: 2017-01-20), 10-K (filing date: 2016-01-19), 10-K (filing date: 2015-01-20).

Adobe Inc., adjustments to financial statements

US$ in thousands

Based on: 10-K (filing date: 2020-01-21), 10-K (filing date: 2019-01-25), 10-K (filing date: 2018-01-22), 10-K (filing date: 2017-01-20), 10-K (filing date: 2016-01-19), 10-K (filing date: 2015-01-20).

Adobe Inc., Financial Data: Reported vs. Adjusted

Adobe Inc., adjusted financial ratios

Based on: 10-K (filing date: 2020-01-21), 10-K (filing date: 2019-01-25), 10-K (filing date: 2018-01-22), 10-K (filing date: 2017-01-20), 10-K (filing date: 2016-01-19), 10-K (filing date: 2015-01-20).

Adobe Inc., Financial Ratios: Reported vs. Adjusted

Based on: 10-K (filing date: 2020-01-21), 10-K (filing date: 2019-01-25), 10-K (filing date: 2018-01-22), 10-K (filing date: 2017-01-20), 10-K (filing date: 2016-01-19), 10-K (filing date: 2015-01-20).

Based on: 10-K (filing date: 2020-01-21), 10-K (filing date: 2019-01-25), 10-K (filing date: 2018-01-22), 10-K (filing date: 2017-01-20), 10-K (filing date: 2016-01-19), 10-K (filing date: 2015-01-20).

Based on: 10-K (filing date: 2020-01-21), 10-K (filing date: 2019-01-25), 10-K (filing date: 2018-01-22), 10-K (filing date: 2017-01-20), 10-K (filing date: 2016-01-19), 10-K (filing date: 2015-01-20).

Based on: 10-K (filing date: 2020-01-21), 10-K (filing date: 2019-01-25), 10-K (filing date: 2018-01-22), 10-K (filing date: 2017-01-20), 10-K (filing date: 2016-01-19), 10-K (filing date: 2015-01-20).