Adobe 2001 Annual Report Download - page 95

Download and view the complete annual report

Please find page 95 of the 2001 Adobe annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 105

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105

ADOBE SYSTEMS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In thousands, except share and per share data)
Note 15. Financial Instruments (Continued)
Balance Sheet Hedging—Hedging of Foreign Currency Assets and Liabilities
We hedge our net recognized foreign currency assets and liabilities with forward foreign exchange
contracts to reduce the risk that our earnings and cash flows will be adversely affected by changes in
foreign currency exchange rates. These derivative instruments hedge assets and liabilities that are
denominated in foreign currencies and are carried at fair value with changes in the fair value recorded as
other income (loss). These derivative instruments do not subject us to material balance sheet risk due to
exchange rate movements because gains and losses on these derivatives offset gains and losses on the assets
and liabilities being hedged. At November 30, 2001, the outstanding balance sheet hedging derivatives had
maturities of 60 days or less.
Net Gain (Loss) Recognized in Other Income Relating to Balance Sheet Hedging:
Year ended Year ended
November 30, 2001 December 1, 2000
Loss on foreign currency assets and liabilities:
Realized net gain (loss) recognized in other
income ............................ $(3,288) $ 240
Unrealized net gain (loss) recognized in other
income ............................ 109 (1,803)
(3,179) (1,563)
Gain on hedges of foreign currency assets and
liabilities:
Realized net gain recognized in other income . . 3,834 33
Unrealized net gain (loss) recognized in other
income ............................ (622) 491
3,212 524
Net gain (loss) recognized in other income . . $ 33 $(1,039)
Equity Hedging Instruments
We also hedge market value fluctuations of certain equity holdings in publicly traded companies with
forward contracts. These are accounted for as ‘‘Fair Value Hedges’’ in accordance with SFAS 133. The
difference between the cost and market value of the equity investments prior to entering into fair value
hedges remains in other comprehensive income until the hedge contract is settled; at which time it is
reclassified to investment gain (loss). Subsequent gains and losses on the forward contract and the equity
securities being hedged are recorded in investment gain (loss) on the consolidated statement of income.
We have no outstanding forward contracts hedging equity investments remaining as of November 30, 2001.
Concentration of Risk
Financial instruments that potentially subject us to concentrations of credit risk are primarily cash,
cash equivalents, short-term investments, and accounts receivable.
95