Income Tax Accounting Policy
Income Tax Expense (Benefit)
Effective Income Tax Rate (EITR)
Components of Deferred Tax Assets and Liabilities
Deferred Tax Assets and Liabilities, Classification
Analyst Adjustments: Removal of Deferred Taxes
Adjusted Ratios: Removal of Deferred Taxes (Summary)
Adjusted Current Ratio
Adjusted Net Profit Margin
Adjusted Total Asset Turnover
Adjusted Financial Leverage
Adjusted Return on Equity (ROE)
Adjusted Return on Assets (ROA)

Adobe uses the asset and liability method of accounting for income taxes. Under this method, income tax expense is recognized for the amount of taxes payable or refundable for the current year. In addition, deferred tax assets and liabilities are recognized for expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities, and for operating losses and tax credit carryforwards. Adobe records a valuation allowance to reduce deferred tax assets to an amount for which realization is more likely than not.

Source: 10-K (filing date: 2019-01-25).

Adobe Inc., income tax expense (benefit), continuing operations

US$ in thousands

	12 months ended	Nov 30, 2018		Dec 1, 2017		Dec 2, 2016		Nov 27, 2015		Nov 28, 2014		Nov 29, 2013
	United States federal
	Foreign
	State and local
	Current
	United States federal
	Foreign
	State and local
	Deferred
	Tax expense attributable to employee stock plans
	Provision for income taxes

Based on: 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), 10-K (filing date: 2014-01-21).

Item	Description	The company
Current	Amount of current income tax expense (benefit) pertaining to taxable income (loss) from continuing operations.	Adobe Inc.’s current increased from 2016 to 2017 and from 2017 to 2018.
Deferred	Amount of deferred income tax expense (benefit) pertaining to income (loss) from continuing operations.	Adobe Inc.’s deferred increased from 2016 to 2017 but then declined significantly from 2017 to 2018.
Provision for income taxes	Amount of current income tax expense (benefit) and deferred income tax expense (benefit) pertaining to continuing operations.	Adobe Inc.’s provision for income taxes increased from 2016 to 2017 but then declined significantly from 2017 to 2018.

Adobe Inc., effective income tax rate (EITR) reconciliation

		Nov 30, 2018	Dec 1, 2017	Dec 2, 2016	Nov 27, 2015	Nov 28, 2014	Nov 29, 2013
	U.S. federal statutory tax rate
	Effective income tax rate

Based on: 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), 10-K (filing date: 2014-01-21).

Item	Description	The company
Effective income tax rate	Percentage of current income tax expense (benefit) and deferred income tax expense (benefit) pertaining to continuing operations.	Adobe Inc.’s effective income tax rate increased from 2016 to 2017 but then declined significantly from 2017 to 2018.

Adobe Inc., components of deferred tax assets and liabilities

US$ in thousands

		Nov 30, 2018		Dec 1, 2017		Dec 2, 2016		Nov 27, 2015		Nov 28, 2014		Nov 29, 2013
	Acquired technology
	Reserves and accruals
	Deferred revenue
	Stock-based compensation
	Net operating loss carryforwards of acquired companies
	Credit carryforwards
	Capitalized expenses
	Benefits relating to tax positions
	Other
	Gross deferred tax assets
	Deferred tax asset valuation allowance
	Deferred tax assets
	Depreciation and amortization
	Undistributed earnings of foreign subsidiaries
	Acquired intangible assets
	Deferred tax liabilities
	Net deferred tax assets (liabilities)

Based on: 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), 10-K (filing date: 2014-01-21).

Item	Description	The company
Gross deferred tax assets	Amount before allocation of valuation allowances of deferred tax asset attributable to deductible temporary differences and carryforwards.	Adobe Inc.’s gross deferred tax assets increased from 2016 to 2017 and from 2017 to 2018.
Deferred tax assets	Amount after allocation of valuation allowances of deferred tax asset attributable to deductible temporary differences and carryforwards.	Adobe Inc.’s deferred tax assets increased from 2016 to 2017 and from 2017 to 2018.
Net deferred tax assets (liabilities)	Amount, after allocation of valuation allowances and deferred tax liability, of deferred tax asset attributable to deductible differences and carryforwards, without jurisdictional netting.	Adobe Inc.’s net deferred tax assets (liabilities) declined from 2016 to 2017 but then increased from 2017 to 2018 exceeding 2016 level.

Adobe Inc., deferred tax assets and liabilities, classification

US$ in thousands

		Nov 30, 2018	Dec 1, 2017	Dec 2, 2016	Nov 27, 2015	Nov 28, 2014	Nov 29, 2013
	Current deferred tax assets
	Non-current deferred tax liabilities

Based on: 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), 10-K (filing date: 2014-01-21).

Item	Description	The company
Non-current deferred tax liabilities	Amount, after deferred tax asset, of deferred tax liability attributable to taxable differences, with jurisdictional netting and classified as noncurrent.	Adobe Inc.’s non-current deferred tax liabilities increased from 2016 to 2017 but then declined significantly from 2017 to 2018.

Adobe Inc., adjustments to financial data

US$ in thousands

		Nov 30, 2018	Dec 1, 2017	Dec 2, 2016	Nov 27, 2015	Nov 28, 2014	Nov 29, 2013
	Adjustment to Current Assets
	Current assets (as reported)
	Less: Current deferred tax assets, net
	Current assets (adjusted)
	Adjustment to Total Assets
	Total assets (as reported)
	Less: Current deferred tax assets, net
	Total assets (adjusted)
	Adjustment to Total Liabilities
	Total liabilities (as reported)
	Less: Noncurrent deferred tax liabilities, net
	Total liabilities (adjusted)
	Adjustment to Stockholders’ Equity
	Stockholders’ equity (as reported)
	Less: Net deferred tax assets (liabilities)
	Stockholders’ equity (adjusted)
	Adjustment to Net Income
	Net income (as reported)
	Add: Deferred income tax expense (benefit)
	Net income (adjusted)

Based on: 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), 10-K (filing date: 2014-01-21).

Adobe Inc., Financial Data: Reported vs. Adjusted

Adobe Inc., adjusted ratios

		Nov 30, 2018	Dec 1, 2017	Dec 2, 2016	Nov 27, 2015	Nov 28, 2014	Nov 29, 2013
	Current Ratio
	Reported current ratio
	Adjusted current ratio
	Net Profit Margin
	Reported net profit margin
	Adjusted net profit margin
	Total Asset Turnover
	Reported total asset turnover
	Adjusted total asset turnover
	Financial Leverage
	Reported financial leverage
	Adjusted financial leverage
	Return on Equity (ROE)
	Reported ROE
	Adjusted ROE
	Return on Assets (ROA)
	Reported ROA
	Adjusted ROA

Based on: 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), 10-K (filing date: 2014-01-21).

Ratio	Description	The company
Adjusted current ratio	A liquidity ratio calculated as adjusted current assets divided by adjusted current liabilities.	Adobe Inc.’s adjusted current ratio deteriorated from 2016 to 2017 and from 2017 to 2018.
Adjusted net profit margin	An indicator of profitability, calculated as adjusted net income divided by total revenue.	Adobe Inc.’s adjusted net profit margin improved from 2016 to 2017 but then slightly deteriorated from 2017 to 2018.
Adjusted total asset turnover	An activity ratio calculated as total revenue divided by adjusted total assets.	Adobe Inc.’s adjusted total asset turnover improved from 2016 to 2017 but then slightly deteriorated from 2017 to 2018 not reaching 2016 level.
Adjusted financial leverage	A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity. Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income.	Adobe Inc.’s adjusted financial leverage increased from 2016 to 2017 and from 2017 to 2018.
Adjusted ROE	A profitability ratio calculated as adjusted net income divided by adjusted shareholders’ equity.	Adobe Inc.’s adjusted ROE improved from 2016 to 2017 and from 2017 to 2018.
Adjusted ROA	A profitability ratio calculated as adjusted net income divided by adjusted total assets.	Adobe Inc.’s adjusted ROA improved from 2016 to 2017 but then slightly deteriorated from 2017 to 2018.

Adobe Inc., Ratios: Reported vs. Adjusted

		Nov 30, 2018	Dec 1, 2017	Dec 2, 2016	Nov 27, 2015	Nov 28, 2014	Nov 29, 2013
	As Reported
	Selected Financial Data (US$ in thousands)
	Current assets
	Current liabilities
	Ratio
	Current ratio¹
	Adjusted for Deferred Taxes
	Selected Financial Data (US$ in thousands)
	Adjusted current assets
	Current liabilities
	Ratio
	Adjusted current ratio²

Based on: 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), 10-K (filing date: 2014-01-21).

2018 Calculations

¹ Current ratio = Current assets ÷ Current liabilities
= hidden ÷ hidden = hidden

² Adjusted current ratio = Adjusted current assets ÷ Current liabilities
= hidden ÷ hidden = hidden

Ratio	Description	The company
Adjusted current ratio	A liquidity ratio calculated as adjusted current assets divided by adjusted current liabilities.	Adobe Inc.’s adjusted current ratio deteriorated from 2016 to 2017 and from 2017 to 2018.

		Nov 30, 2018	Dec 1, 2017	Dec 2, 2016	Nov 27, 2015	Nov 28, 2014	Nov 29, 2013
	As Reported
	Selected Financial Data (US$ in thousands)
	Net income
	Revenue
	Ratio
	Net profit margin¹
	Adjusted for Deferred Taxes
	Selected Financial Data (US$ in thousands)
	Adjusted net income
	Revenue
	Ratio
	Adjusted net profit margin²

Based on: 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), 10-K (filing date: 2014-01-21).

2018 Calculations

¹ Net profit margin = 100 × Net income ÷ Revenue
= 100 × hidden ÷ hidden = hidden

² Adjusted net profit margin = 100 × Adjusted net income ÷ Revenue
= 100 × hidden ÷ hidden = hidden

Ratio	Description	The company
Adjusted net profit margin	An indicator of profitability, calculated as adjusted net income divided by total revenue.	Adobe Inc.’s adjusted net profit margin improved from 2016 to 2017 but then slightly deteriorated from 2017 to 2018.

		Nov 30, 2018	Dec 1, 2017	Dec 2, 2016	Nov 27, 2015	Nov 28, 2014	Nov 29, 2013
	As Reported
	Selected Financial Data (US$ in thousands)
	Revenue
	Total assets
	Ratio
	Total asset turnover¹
	Adjusted for Deferred Taxes
	Selected Financial Data (US$ in thousands)
	Revenue
	Adjusted total assets
	Ratio
	Adjusted total asset turnover²

Based on: 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), 10-K (filing date: 2014-01-21).

2018 Calculations

¹ Total asset turnover = Revenue ÷ Total assets
= hidden ÷ hidden = hidden

² Adjusted total asset turnover = Revenue ÷ Adjusted total assets
= hidden ÷ hidden = hidden

Ratio	Description	The company
Adjusted total asset turnover	An activity ratio calculated as total revenue divided by adjusted total assets.	Adobe Inc.’s adjusted total asset turnover improved from 2016 to 2017 but then slightly deteriorated from 2017 to 2018 not reaching 2016 level.

		Nov 30, 2018	Dec 1, 2017	Dec 2, 2016	Nov 27, 2015	Nov 28, 2014	Nov 29, 2013
	As Reported
	Selected Financial Data (US$ in thousands)
	Total assets
	Stockholders’ equity
	Ratio
	Financial leverage¹
	Adjusted for Deferred Taxes
	Selected Financial Data (US$ in thousands)
	Adjusted total assets
	Adjusted stockholders’ equity
	Ratio
	Adjusted financial leverage²

Based on: 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), 10-K (filing date: 2014-01-21).

2018 Calculations

¹ Financial leverage = Total assets ÷ Stockholders’ equity
= hidden ÷ hidden = hidden

² Adjusted financial leverage = Adjusted total assets ÷ Adjusted stockholders’ equity
= hidden ÷ hidden = hidden

Ratio	Description	The company
Adjusted financial leverage	A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity. Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income.	Adobe Inc.’s adjusted financial leverage increased from 2016 to 2017 and from 2017 to 2018.

		Nov 30, 2018	Dec 1, 2017	Dec 2, 2016	Nov 27, 2015	Nov 28, 2014	Nov 29, 2013
	As Reported
	Selected Financial Data (US$ in thousands)
	Net income
	Stockholders’ equity
	Ratio
	ROE¹
	Adjusted for Deferred Taxes
	Selected Financial Data (US$ in thousands)
	Adjusted net income
	Adjusted stockholders’ equity
	Ratio
	Adjusted ROE²

Based on: 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), 10-K (filing date: 2014-01-21).

2018 Calculations

¹ ROE = 100 × Net income ÷ Stockholders’ equity
= 100 × hidden ÷ hidden = hidden

² Adjusted ROE = 100 × Adjusted net income ÷ Adjusted stockholders’ equity
= 100 × hidden ÷ hidden = hidden

Ratio	Description	The company
Adjusted ROE	A profitability ratio calculated as adjusted net income divided by adjusted shareholders’ equity.	Adobe Inc.’s adjusted ROE improved from 2016 to 2017 and from 2017 to 2018.

		Nov 30, 2018	Dec 1, 2017	Dec 2, 2016	Nov 27, 2015	Nov 28, 2014	Nov 29, 2013
	As Reported
	Selected Financial Data (US$ in thousands)
	Net income
	Total assets
	Ratio
	ROA¹
	Adjusted for Deferred Taxes
	Selected Financial Data (US$ in thousands)
	Adjusted net income
	Adjusted total assets
	Ratio
	Adjusted ROA²

Based on: 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), 10-K (filing date: 2014-01-21).

2018 Calculations

¹ ROA = 100 × Net income ÷ Total assets
= 100 × hidden ÷ hidden = hidden

² Adjusted ROA = 100 × Adjusted net income ÷ Adjusted total assets
= 100 × hidden ÷ hidden = hidden

Ratio	Description	The company
Adjusted ROA	A profitability ratio calculated as adjusted net income divided by adjusted total assets.	Adobe Inc.’s adjusted ROA improved from 2016 to 2017 but then slightly deteriorated from 2017 to 2018.

	Adobe Inc.	Other companies (not purchased previously)
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Common-Size Financial Statements
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Relative Valuation
Discounted Cash Flow (DCF) Valuation
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Long-term Trends
Analysis
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Financial Statements
Common-Size Financial Statements
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Discounted Cash Flow (DCF) Valuation
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Long-term Trends
Analysis
Financial Reporting Quality

Adobe Inc. (ADBE)

Analysis of Income Taxes

Income Tax Accounting Policy

Income Tax Expense (Benefit)

Effective Income Tax Rate (EITR)

Components of Deferred Tax Assets and Liabilities

Deferred Tax Assets and Liabilities, Classification

Analyst Adjustments: Removal of Deferred Taxes

Adobe Inc., Financial Data: Reported vs. Adjusted

Adjusted Ratios: Removal of Deferred Taxes (Summary)

Adobe Inc., Ratios: Reported vs. Adjusted

Adjusted Current Ratio

Adjusted Net Profit Margin

Adjusted Total Asset Turnover

Adjusted Financial Leverage

Adjusted Return on Equity (ROE)

Adjusted Return on Assets (ROA)