Adjustment exception means that adjustments to line 18 using the worksheet on p21 of the f1116 instructions is optional. The threshold where the adjustments must be made is shown on p21 3rd column. There are 2 amounts that cannot be exceeded to maintain the option; one on line 5 of the QDCGTW worksheet and the 2nd is less than $20k total for net foreign source cap gain + dividends. You will find in your case you are below the threshold amounts and the exception holds. That means that the amount on line 18 will be from the 1040 line 15 and not from the line 18 worksheet.
