1.	BASIS OF PRESENTATION

(a) Business

The Company develops, markets, licenses, and supports software to automate complex, changing business processes. The Company provides implementation, consulting, training, technical support and hosting services to facilitate the use of its software.

(b) Management estimates and reporting

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S.”) requires management to make estimates and judgments that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the periods presented. Actual results could differ from those estimates. Accounts with reported amounts based on significant estimates and judgments include revenue, deferred income taxes, income taxes payable, fair value of assets acquired and liabilities assumed, intangible assets, goodwill, deferred revenue, and stock-based compensation.

The consolidated financial statements include Pegasystems Inc. and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.

(d) Stock split

On March 6, 2014, the Company’s Board of Directors approved a two-for-one stock split of the Company’s common stock, effected in the form of a stock dividend (the “Stock Split”). On April 1, 2014, each stockholder of record at the close of business on March 20, 2014 (the “Record Date”) received as a dividend, one additional share of common stock, par value $.01, for each share of common stock held on the Record Date. All shares and amounts of common stock, additional paid-in capital, and per share amounts in the Company’s audited consolidated financial statements and in the accompanying notes for all periods presented have been restated to reflect the Stock Split, except for the number of authorized shares of common stock.

(e) Retrospective application of purchase price adjustments

During 2014, the Company made adjustments to the purchase price allocation in connection with its acquisition of Antenna Software, Inc. (together with its subsidiaries, “Antenna”). These purchase price adjustments are reflected retrospectively as of December 31, 2013 in the Company’s audited consolidated balance sheet. These revisions did not have any impact on the Company’s previously reported results of operations or cash flows. See Note 8 “Acquisitions” for further discussion of these adjustments.