Adobe 2009 Annual Report Download - page 95

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ADOBE SYSTEMS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
95
The fair value of derivative instruments in our Consolidated Balance Sheets as of November 27, 2009 were as follows
(in thousands):
Fair Values of Derivative Instruments
Asset Derivatives
Liability Derivatives
Balance Sheet
Location
Fair Value
Balance Sheet
Location
Fair Value
Derivatives designated as hedging instruments:
Foreign exchange option contracts
(*)
................
Prepaid expense
and other
current assets
$
4,175
Accrued
expenses
$
—
Derivatives not designated as hedging
instruments:
Foreign exchange forward contracts
................
Prepaid expense
and other
current assets 132
Accrued
expenses
1,589
Total derivatives ..................................................
$
4,307
$
1,589
_________________________________________
(*) Hedging effectiveness expected to be recognized to income within the next twelve months.
Net gains (losses) recognized in interest and other income, net relating to balance sheet hedging for fiscal 2009, 2008
and 2007 were as follows (in thousands):
2009
2008
2007
Gain (loss) on foreign currency assets and liabilities:
Net realized gain (loss) recognized in other income .................
$
25,384
$
(7,738
)
$
13,388
Net unrealized (loss) gain recognized in other income related to
instruments outstanding .....................................
(6,390
)
5,223
(4,035
)
18,994
(2,515
)
9,353
(Loss) gain on hedges of foreign currency assets and liabilities:
Net realized loss recognized in other income ......................
(11,872
)
(3,255
)
(8,394
)
Net unrealized (loss) gain recognized in other income ...............
(2,535
)
3,920
1,887
(14,407
)
665
(6,507
)
Net gain (loss) recognized in other income ..........................
$
4,587
$
(1,850
)
$
2,846
Concentration of Risk
Financial instruments that potentially subject us to concentrations of credit risk are short-term investments, primarily
fixed-income securities, structured repurchase transactions, derivatives, hedging foreign currency and interest rate risk and
trade receivables.
Our investment portfolio consists of investment-grade securities diversified among security types, industries and issuers.
Our cash and investments are held and managed by recognized financial institutions that follow our investment policy. Our
policy limits the amount of credit exposure to any one security issue or issuer and we believe no significant concentration of
credit risk exists with respect to these investments.
We mitigate concentration of risk related to foreign currency hedges through a policy that establishes counterparty
limits. The bank counterparties in these contracts expose us to credit-related losses in the event of their nonperformance.
However, to mitigate that risk, we only contract with counterparties who meet our minimum requirements under our
counterparty risk assessment process. In addition, our hedging policy establishes maximum limits for each counterparty. We
monitor ratings, credit spreads and potential downgrades on at least a quarterly basis. Based on our on-going assessment of
counterparty risk, we will adjust our exposure to various counterparties.