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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 73
For the years ended March 4, 2006, February 26, 2005 and February 28, 2004
subsequently reclassied to earnings in the period in which the cash ows from the associated hedged
transactions affect earnings. The maturity dates of these instruments range from March 2006 through to
April 2008. 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 $24,868 (February 26, 2005 — $14,644;
February 28, 2004 — $5,468). These amounts were included in
Other current assets and Accumulated
other comprehensive income
. In scal 2007, $16,398 of the unrealized gains on the forward contracts will
be reclassied to earnings. These derivative gains or losses are reclassied to earnings in the same period
that the forecasted transaction affects earnings.
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 2006. As at March 4, 2006, a gain of $18 was recorded in respect
of this amount (February 26, 2005 — gain of $482; February 28, 2004 — loss of $69). 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 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. The maturity dates of these instruments are in March, 2006. As at March 4, 2006, a loss of
$404 was recorded in respect of this amount (February 26, 2005 – loss of $529; February 28, 2004 — $nil).
This amount was included in
Selling, marketing and administration
.
The Company is exposed to credit risk on derivative nancial 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 nancial institutions and by continuously monitoring their
creditworthiness. As at March 4, 2006, the maximum exposure to a single counterparty was 40% of
outstanding derivative instruments (February 26, 2005 — 38%).
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 March 4, 2006, no single issuer represented more than 12% of the total cash, cash
equivalents and investments (February 26, 2005 — no single issuer represented more than 9% of the total
cash, cash equivalents and 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 uctuate with changes in prevailing interest rates. The Company does not currently use
interest rate derivative nancial instruments in its investment portfolio.
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
allowance for doubtful accounts as at March 4, 2006 is $1,551 (February 26, 2005 — $1,697).