VeriSign (VRSN)

Potential Effect of New Accounting Pronouncements

There may be potential new accounting pronouncements or regulatory rulings, which may have an impact on our future financial condition and results of operations. For example, at the July 25, 2007, FASB meeting, the FASB approved the proposed FSP on convertible debt instruments that may be settled in cash upon conversion (including partial cash settlement). Our 3.25% convertible debentures due 2037 would be affected by this proposed FSP. The proposed FSP would require the issuer to separately account for the liability and equity components of the instrument in a manner that reflects the issuer’s economic interest cost. Further, the proposed FSP would require bifurcation of a component of the debt, classification of that component as equity, and then accretion of the resulting discount on the debt to result in the “economic interest cost” being reflected in the statement of income. In applying this FSP, the FASB emphasized that the FSP would be applied to the terms of the instruments as they existed for the time periods they existed, therefore, the application of the FSP would be applied retrospectively to all periods presented. If the FSP is issued, it is expected to be effective for fiscal years beginning after December 15, 2007. The Company would be required to implement the proposed standard during the first quarter of fiscal 2008, which begins on January 1, 2008. We are currently evaluating the effect that the adoption of this FSP would have on our consolidated results of operations and financial condition. We cannot predict the outcome of this process or any other changes in GAAP that may affect accounting for convertible debt securities. Any change in the accounting method for convertible debt securities could have an adverse impact on our financial results. These impacts could adversely affect the trading price of our common stock and in turn negatively impact the trading price of the debentures.

See Note 10 to our Condensed Consolidated Financial Statements included in Part 1. “Junior Subordinated Convertible Debentures” for additional information about the debentures. Please also see Note 16 to our Condensed Consolidated Financial Statements included in Part 1. “Recent Accounting Pronouncements” for additional information about recent accounting pronouncements.