Avid 2009 Annual Report Download - page 45

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Through third parties, we offer lease financing options to our customers. During the terms of these financing
arrangements, which are generally for three years, we may remain liable for a portion of the unpaid principal balance in
the event of a default on the lease by the end user, but our liability is limited in the aggregate based on a percentage of
initial amounts funded or, in certain cases, amounts of unpaid balances. At December 31, 2009, our maximum exposure
under these programs was $2.5 million.
We have three letters of credit at a bank that are used as security deposits in connection with our recently leased
Burlington, Massachusetts office space. In the event of default on the underlying leases, the landlords would, at
December 31, 2009, be eligible to draw against the letters of credit to a maximum of approximately $2.6 million in the
aggregate. The letters of credit are subject to aggregate reductions of approximately $0.4 million at the end of each of
the second, third and fifth years, provided the Company is not in default of the underlying leases and meets certain
financial performance conditions. In no case will the letters of credit amounts be reduced to below $1.3 million in the
aggregate throughout the lease periods, all of which extend to May 2020. At December 31, 2009, the Company was not
in default of any of the underlying leases.
We also have a stand-by letter of credit at a bank that is used as a security deposit in connection with our Daly City,
California office space lease. In the event of a default on this lease, the landlord would be eligible to draw against this
letter of credit to a maximum, at December 31, 2009, of $750 thousand. The letter of credit will remain in effect at this
amount throughout the remaining lease period, which runs through September 2014. At December 31, 2009, we were
not in default of this lease.
We operate our business globally and, consequently, our results from operations are exposed to movements in foreign
currency exchange rates. We enter into forward exchange contracts, which generally have one-month maturities, to
reduce exposures associated with the foreign exchange risks of certain forecasted third-party and intercompany
receivables, payables and cash balances. At December 31, 2009, we had foreign currency forward contracts outstanding
with an aggregate notional value of $46.2 million, denominated in the euro, British pound, Japanese yen and Canadian
dollar, as a hedge against forecasted foreign currency denominated receivables, payables and cash balances.
OFF-BALANCE SHEET ARRANGEMENTS
Other than operating leases, we do not engage in off-balance sheet financing arrangements or have any variable-interest
entities. At December 31, 2009, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of
SEC Regulation S-K.
RECENT ACCOUNTING PRONOUNCEMENTS
In October 2009, the FASB issued Accounting Standards Update No. 2009-13, Multiple-Deliverable Revenue
Arrangements, an amendment to ASC topic 605, Revenue Recognition, and Accounting Standards Update No. 2009-14,
Certain Revenue Arrangements That Include Software Elements, an amendment to ASC subtopic 985-605, Software –
Revenue Recognition (the ―Updates‖). See our critical accounting policy for ―Revenue Recognition and Allowances for
Product Returns and Exchanges‖ found previously in this Item 7 under the heading ―Critical Accounting Policies and
Estimates‖ for a further discussion of this guidance.
In June 2009, the FASB issued SFAS No. 167, Amendments to FASB Interpretation No. 46(R) (now codified within
ASC topic 810, Consolidation). This guidance requires an enterprise to perform an analysis to determine whether the
enterprise’s variable interest or interests give it a controlling financial interest in a variable interest entity. This analysis
identifies the primary beneficiary of a variable interest entity as one with the power to direct the activities of a variable
interest entity that most significantly impact the entity’s economic performance and the obligation to absorb losses of
the entity that could potentially be significant to the variable interest. The guidance is effective as of the beginning of
the annual reporting period commencing after November 15, 2009, or January 1, 2010 for us, with early adoption
prohibited. Adoption is not expected to have a significant impact on our financial position or results of operations.