Blackberry 2006 Annual Report Download - page 48

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Research In Motion Limited
46
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)
The Company assesses declines in the value of individual investments for impairment to determine whether
the decline is other-than-temporary. The Company makes this assessment by considering available
evidence, including changes in general market conditions, specic industry and individual company data,
the length of time and the extent to which the fair value has been less than cost, the nancial condition
and the near-term prospects of the individual investment. In the event that a decline in the fair value of
an investment occurs and the decline in value is considered to be other-than-temporary, an appropriate
write-down would be recorded.
(i) Derivative nancial instruments
The Company uses derivative nancial instruments, including forward contracts and options, to hedge
certain foreign currency exposures. The Company does not use derivative nancial instruments for
speculative purposes.
The Company formally documents relationships between hedging instruments and associated hedged
items. This documentation includes: identication of the specic foreign currency asset, liability or
forecasted transaction being hedged; the nature of the risk being hedged; the hedge objective; and, the
method of assessing hedge effectiveness. Hedge effectiveness is formally assessed, both at hedge
inception and on an ongoing basis, to determine whether the derivatives used in hedging transactions are
highly effective in offsetting changes in foreign currency denominated assets, liabilities and anticipated
cash ows of hedged items.
SFAS 133,
Accounting for Derivative Instruments
, as amended by SFAS 137, 138 and 149, requires all
derivative instruments to be recognized at fair value on the consolidated balance sheet and outlines the
criteria to be met in order to designate a derivative instrument as a hedge and the methods for evaluating
hedge effectiveness. The fair value is calculated based on quoted market prices. For derivative instruments
designated as fair value hedges, changes in fair value are recognized in current earnings, and will generally
be offset by changes in the fair value of the associated hedged asset or liability. For derivative instruments
designated as cash ow hedges, the effective portion of changes in fair value are recorded in other
comprehensive income and subsequently reclassied to earnings in the period in which the cash ows
from the associated hedged transaction affect earnings. Ineffective portions of changes in fair value, if
any, are recorded in current earnings. If an anticipated transaction is deemed no longer likely to occur,
the corresponding derivative instrument is de-designated as a hedge, and gains and losses are recognized
in earnings at that time. Any future changes in the fair value of the instrument are recognized in
current earnings.
(j) Inventories
Raw materials are stated at the lower of cost and replacement cost. Work in process and nished goods
inventories are stated at the lower of cost and net realizable value. Cost includes the cost of materials plus
direct labour applied to the product and the applicable share of manufacturing overhead. Cost is
determined on a rst-in-rst-out basis.
(k) Capital assets
Capital assets are stated at cost less accumulated amortization. No amortization is provided for
construction in progress until the assets are ready for use. Amortization is provided using the following
rates and methods: