Blackberry 2007 Annual Report Download - page 101

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99
(d) Additional information
Advertising expense, which includes media, agency and
promotional expenses totalling $67,738 (March 4,
2006 - $32,606; February 26, 2005 - $29,208) is included in
Selling, marketing and administration expense.
Selling, marketing and administration expense for the
fiscal year includes a foreign currency exchange loss of
$2,045 (March 4, 2006 – loss of $2,519; February 26, 2005 –
gain of $418).
19. FINANCIAL INSTRUMENTS
Values of financial instruments outstanding were as follows:
March 3, 2007
Assets (Liabilities) Notional
Amount Carrying
Amount Estimated
Fair Value
Cash and cash equivalents $ - $ 677,144 $ 677,144
Available-for-sale investments $ - $ 735,734 $ 735,734
Long-term debt $ - $ (6,613) $ (6,767)
Currency forward contracts - asset $ 246,325 $ 5,115 $ 5,115
Currency forward contracts - liability $ 575,406 $ (12,406) $ (12,406)
March 4, 2006
Assets (Liabilities) Notional
Amount Carrying
Amount Estimated
Fair Value
Cash and cash equivalents $ - $ 459,540 $ 459,540
Available-for-sale investments $ - $ 789,862 $ 789,862
Long-term debt $ - $ (7,113) $ (7,322)
Currency forward contracts - asset $ 300,362 $ 24,900 $ 24,900
Currency forward contracts - liability $ 74,891 $ (418) $ (418)
For the Company’s trade receivables, other receivables,
accounts payable and accrued liabilities, the fair values
approximate their respective carrying amounts due to
their short maturities. The fair value of investments has
been estimated by using market quoted prices and interest
rates. The fair value of currency forward contracts has been
estimated using market quoted currency spot rates and
interest rates. The fair value of long-term debt has been
estimated using market quoted interest rates. The estimates
presented herein are not necessarily indicative of the
amounts that RIM could realize in a current market exchange.
Changes in assumptions could have a significant effect on the
estimates.
The Company is exposed to foreign exchange risk as a
result of transactions in currencies other than its functional
currency, the U.S. dollar. The majority of the Company’s
revenues in fiscal 2007 are transacted in U.S. dollars. Portions
of the revenues are denominated in British Pounds, Canadian
dollars, and Euros. Purchases of raw materials are primarily
transacted in U.S. dollars. Other expenses, consisting
of the majority of salaries, certain operating costs and
manufacturing overhead are incurred primarily in Canadian
dollars. At March 3, 2007 approximately 3% of cash and cash
equivalents, 30% of trade receivables and 14% of accounts
payable and accrued liabilities are denominated in foreign
currencies (March 4, 2006 – 5%, 28% and 19%, respectively).
These foreign currencies primarily include the British Pound,
Canadian dollar, and Euro.
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 financial instruments, including
currency forward contracts and currency options. The
Company does not use derivative instruments for speculative
purposes. The principal currencies hedged include the British
Pound, Canadian dollar, and Euro.