Blackberry 2005 Annual Report Download - page 72

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To hedge exposure relating to foreign currency denominated long-term debt, the Company has entered into
forward contracts to sell U.S. dollars and purchase Canadian dollars. These contracts have been designated as
fair value hedges, with gains and losses on the hedge instruments being recognized in earnings each period,
offsetting the change in the U.S. dollar value of the hedged liability. The maturity dates of these instruments are
in March 2005. As at February 26, 2005, a gain of $482 was recorded in respect of this amount (February 28, 2004
– loss of $69; March 1, 2003 – gain of $419). This amount was included in Selling, marketing and administration.
To hedge exposure relating to foreign currency cash and receivable balances, the Company has entered into
forward contracts to sell Euros and purchase U.S. dollars and to sell British Pounds and purchase U.S. dollars.
These contracts have been designated as fair value hedges, with gains and losses on the hedge instruments
being recognized in earnings each period, offsetting the change in the U.S. dollar value of the hedged assets.
The maturity dates of these instruments range from March 2005 to April 2005. As at February 26, 2005, a loss
of $529 was recorded in respect of this amount (February 28, 2004 – $nil; March 1, 2003 – $nil). This amount
was included in Selling, marketing and administration.
The Company is exposed to credit risk on derivative financial instruments arising from the potential for
counterparties to default on their contractual obligations to the Company. The Company minimizes this risk
by limiting counterparties to major financial institutions and by continuously monitoring their creditworthiness.
As at February 26, 2005 the maximum exposure to a single counterparty was 38% of outstanding derivative
instruments (February 28, 2004 – 43%).
The Company is exposed to market and credit risk on its investment portfolio. The Company limits this risk
by investing only in liquid, investment grade securities and by limiting exposure to any one entity or group
of related entities. As at February 26, 2005, no single issuer represented more than 9% of the total cash,
cash equivalents and investments (February 28, 2004 – no single issuer represented more than 4% of the
total cash, cash equivalents and short-term investments).
Cash and cash equivalents and investments are invested in certain instruments of varying maturities.
Consequently, the Company is exposed to interest rate risk as a result of holding investments of varying
maturities. The fair value of investments, as well as the investment income derived from the investment
portfolio, will fluctuate with changes in prevailing interest rates. The Company does not currently use
interest rate derivative financial instruments in its investment portfolio.
The Company, in the normal course of business, monitors the financial condition of its customers and reviews
the credit history of each new customer. The Company establishes an allowance for doubtful accounts
that corresponds to the specific credit risk of its customers, historical trends and economic circumstances.
The allowance for doubtful accounts as at February 26, 2005 is $1,697 (February 28, 2004 – $2,379).
While the Company sells its products and services to a variety of customers, as at February 26, 2005
two customers comprised 23%, and 12% of trade receivables (February 28, 2004 – two customers comprised
24%, and 10%). Additionally, four customers comprised 14%, 13%, 13% and 10% of the Company’s revenue
(February 28, 2004 – two customers comprised 15% and 13%; March 1, 2003 – one customer comprised 12%).
70 Research In Motion Limited •Incorporated Under the Laws of Ontario (In thousands of United States dollars, except per share data, and except as otherwise indicated)