Avid 2014 Annual Report Download - page 71

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Cash, Cash Equivalents and Marketable Securities
Cash equivalents consist primarily of commercial paper, money market investments and certificates of deposit. The Company
considers all debt instruments purchased with an original maturity of three months or less to be cash equivalents. Marketable
securities, have historically consisted of certificates of deposit, commercial paper, asset-backed securities, discount notes, and
corporate, municipal, agency and foreign bonds. The Company generally invests in securities that mature within one year from the
date of purchase. The Company classifies its cash equivalents and marketable securities as “available for sale” and reports them at fair
value, with unrealized gains and losses excluded from earnings and reported as an adjustment to other comprehensive income (loss),
which is reflected as a separate component of stockholders’ deficit. Amortization or accretion of premium or discount is included in
interest income (expense) in the results of operations. Other than those investments held in the Company’s deferred compensation
plan, the Company held no marketable securities at December 31, 2014 or 2013.
Cash equivalents and marketable securities, including money market investments and mutual funds accounted for as trading securities,
held in the Company’s deferred compensation plan are reported at fair value using quoted market prices with the gains and losses
included as other income (expense) in the Company’s statement of operations. Realized gains and losses from the Company’s
deferred compensation plan were not material for the years ended December 31, 2014, 2013 and 2012. These assets are classified
within other current assets.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash and cash equivalents,
foreign currency contracts and accounts receivable. The Company places its cash and cash equivalents and foreign currency contracts
with financial institutions that management believes to be of high credit quality, and, generally, there are no significant concentrations
in any one issuer of debt securities. Concentrations of credit risk with respect to trade receivables are limited due to the large number
of customers that make up the Company’s customer base and their dispersion across different regions. No individual customer
accounted for 10% or more of the Company’s net revenues or net accounts receivable in the periods presented.
Foreign Currency Risk
The Company has significant international operations and, therefore, the Company’s revenues, earnings, cash flows and financial
position are exposed to foreign currency risk from foreign-currency-denominated receivables, payables, sales and expense
transactions, and net investments in foreign operations. The Company derives more than half of its revenues from customers outside
the United States. This business is, for the most part, transacted through international subsidiaries and generally in the currency of the
end-user customers. Therefore, the Company is exposed to the risks that changes in foreign currency could adversely affect its
revenues, net income, cash flow and financial position. The Company uses derivatives in the form of foreign currency contracts to
manage its short-term exposures to fluctuations in the foreign currency exchange rates that exist as part of its ongoing international
business operations. The Company does not enter into any derivative instruments for trading or speculative purposes.
The Company records all foreign currency contract derivatives on the balance sheet at fair value. The accounting for changes in the
fair value of derivatives depends on the intended use of the derivative, whether the Company has elected to designate a derivative in a
hedging relationship and apply hedge accounting, and whether the hedging relationship has satisfied the criteria necessary to apply
hedge accounting. Derivatives designated and qualifying as hedges of the exposure to changes in the fair value of an asset, liability or
firm commitment attributable to a particular risk are considered fair value hedges. Derivatives designated and qualifying as hedges of
the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges.
Derivatives may also be designated as hedges of the foreign currency exposure of a net investment in a foreign operation. Hedge
accounting generally provides for the matching of the timing of gain or loss recognition on the hedging instrument with the
recognition of the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk in a fair value hedge
or the earnings effect of the hedged forecasted transactions in a cash flow hedge. Under hedge accounting, the determination of hedge
effectiveness is dependent upon whether the gain or loss on the hedging derivative is highly effective in offsetting the gain or loss in
the value of the item being hedged. The Company has not accounted for any foreign currency contracts as hedges in the periods
presented.