Blackberry 2006 Annual Report Download - page 37

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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)
Annual Report 2006 35
For the years ended March 4, 2006, February 26, 2005 and February 28, 2004
As part of its risk management strategy, the Company maintains net monetary asset and/or liability
balances in foreign currencies and engages in foreign currency hedging activities using derivative nancial
instruments, including forward contracts and options. The Company does not use derivative instruments
for speculative purposes.
To hedge exposures relating to foreign currency anticipated transactions, the Company has entered into
forward contracts to sell U.S. Dollars and purchase Canadian Dollars. These contracts have been designated
as cash ow hedges, with the resulting changes in fair value recorded in other comprehensive income, and
subsequently reclassied to earnings in the period in which the cash ows from the associated hedged
transactions affect earnings. These cash ow hedges were fully effective at March 4, 2006. As at March 4,
2006, the unrealized gain on these forward contracts was approximately $24.9 million (February 26, 2005
— $14.6 million). These amounts were included in
Other current assets and Accumulated other
comprehensive income
.
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. As at
March 4, 2006, a gain of $0.02 million was recorded in respect of this amount (February 26, 2005 – gain
of $0.5 million). This amount was included in Selling, marketing and administration expenses.
To hedge exposure relating to foreign currency cash and receivable balances, the Company has entered
into forward contracts to sell Canadian dollars, Euros, British Pounds and Hungarian Forint 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. As at March 4, 2006, a loss of $0.4 million was recorded in respect of this amount
(February 26, 2005 – loss of $0.5 million). This amount was included in Selling, marketing and
administration expenses.

Cash, 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 uctuate with changes in prevailing interest rates. The Company does not currently use
interest rate derivative nancial instruments in its investment portfolio.

The Company has historically been dependent on a small but increasing number of signicant customers
and on large complex contracts with respect to sales of the majority of its products. The Company expects
this trend to continue as it sells an increasing number of its products and service relay access through
network carriers and resellers rather than directly. The Company is undergoing signicant sales growth in
North America and internationally, resulting in the growth in its carrier customer base in terms of numbers,
sales and trade receivables volumes and in some instances new or signicantly increased credit limits. The
Company, in the normal course of business, monitors the nancial 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 specic credit risk of its customers, historical trends and economic circumstances. The
Company also places insurance coverage for a portion of its foreign trade receivables. The allowance as at
March 4, 2006 is $1.6 million (February 26, 2005 — $1.7 million).