Blackberry 2008 Annual Report Download - page 83

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81
(d) Additional information
Advertising expense, which includes media, agency and
promotional expenses totalling $124,578 (March 3,
2007 - $67,738; March 4, 2006 - $32,606) is included in
Selling, marketing and administration expense.
Selling, marketing and administration expense for the
fiscal year includes a foreign currency exchange loss of $5,295
(March 3, 2007 – loss of $2,045; March 4, 2006 – loss of $2,519).
18. FINANCIAL INSTRUMENTS
Values of financial instruments outstanding were as follows:
March 1, 2008
Assets (Liabilities) Notional
Amount Carrying
Amount Estimated
Fair Value
Cash and cash equivalents $ – $ 1,184,398 $ 1,184,398
Available-for-sale investments $ – $ 1,154,098 $ 1,154,098
Long-term debt $ – $ (7,608) $ (7,830)
Currency forward contracts - asset $ 991,884 $ 47,507 $ 47,507
Currency forward contracts - liability $ 699,821 $ (19,793) $ (19,793)
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)
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 is determined using observable
market data based on quoted prices and interest rates. Where
observable market data is unavailable due to a lack of trading
activity, the Company utilizes internally developed models to
estimate fair value. 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 the Company 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 2008 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 1, 2008 approximately 13% of cash and cash
equivalents, 35% of trade receivables and 15% of accounts
payable and accrued liabilities are denominated in foreign
currencies (March 3, 2007 – 3%, 30% and 14%, 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.