This excerpt taken from the ADBE 8-K filed Feb 14, 2006.
Pro Forma Adjustments
Pro forma adjustments are necessary to reflect the estimated purchase price, to reflect amounts related to Macromedias net tangible and intangible assets at an amount equal to the preliminary estimate of their fair values, to reflect the amortization expense related to the estimated amortizable intangible assets and deferred stock-based compensation, to reflect the estimated impact of restructuring activities, and to reflect the income tax effect related to the pro forma adjustments.
There were no significant intercompany balances and transactions between Adobe and Macromedia as of the dates and for the periods of these pro forma condensed combined financial statements.
The pro forma combined provision for income taxes does not necessarily reflect the amounts that would have resulted had Adobe and Macromedia filed consolidated income tax returns during the periods presented.
Adobe has not identified any pre-merger contingencies where the related asset, liability or impairment is probable and the amount of the asset, liability or impairment can be reasonably estimated. Prior to the end of the purchase price allocation period, if information becomes available which would indicate it is probable that such events have occurred and the amounts can be reasonably estimated, such items will be included in the purchase price allocation.
The pro forma adjustments included in the unaudited pro forma condensed combined financial statements are as follows:
(a) To eliminate Macromedias historical intangible assets
(b) To eliminate Macromedias historical goodwill
(c) To eliminate Macromedias equity
(d) To record the fair value of Adobe shares exchanged in the transaction
(e) To record the fair value of Macromedia stock options assumed
(f) To record deferred stock-based compensation related to unvested Macromedia stock options and restricted stock assumed
(g) To accrue Adobes direct costs of the transaction
(h) To record the fair value of Macromedias identifiable intangible assets
(i) To adjust Macromedia land and buildings to fair value
(j) To adjust deferred revenue to the fair value of the legal performance obligations under Macromedia existing contracts
(k) To record Macromedia lease obligations in excess of fair value
(l) To record the fair value of receivables from customer contracts that contain minimum guaranteed revenue amounts with extended payment terms
(m) To record the fair value of Macromedia investments
(n) To record goodwill
(o) To record the deferred tax assets and liability related to the identifiable intangible assets
(p) To net deferred tax assets and liabilities for financial statement presentation
(q) To eliminate Macromedias historical amortization of developed technology, purchased technology and product localization costs
(r) To eliminate Macromedias historical amortization of deferred stock-based compensation
(s) To eliminate Macromedias historical amortization of other intangible assets
(t) To amortize acquired product rights based upon the pattern in which the economic benefits of the intangible assets will be consumed
(u) To amortize other intangible assets based upon the pattern in which the economic benefits of the intangible asset will be consumed
(v) To amortize deferred stock-based compensation
(w) To amortize lease obligations in excess of fair value
(x) To adjust tax provision to reflect the effect of the pro forma adjustments
(y) To record the fair value of a note receivable from an investee
(z) To eliminate Macromedias accrued restructuring costs
(aa) To record restructuring costs associated with exiting activities of Macromedia