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15. DERIVATIVE FINANCIAL INSTRUMENTS
Values of financial instruments outstanding were as follows:
Assets (Liabilities)
Notional
Amount
Estimated
Fair Value
As at February 26, 2011
Currency forward contracts — asset $1,622 $ 63
Currency option contracts — asset $ 156 $ 1
Currency forward contracts — liability $4,848 $(129)
Currency option contracts — liability $ 180 $ (1)
Assets (Liabilities)
Notional
Amount
Estimated
Fair Value
As at February 27, 2010
Currency forward contracts — asset $2,630 $97
Currency forward contracts — liability $ 575 $ (6)
Foreign Exchange
The Company uses derivative instruments to manage exposures to foreign exchange risk resulting from transactions in currencies other
than its functional currency, the U.S. dollar. The Company’s risk management objective in holding derivative instruments is to reduce
the volatility of current and future income as a result of changes in foreign currency. To limit its exposure to adverse movements in
foreign currency exchange rates, the Company enters into foreign currency forward and option contracts. The Company does not use
derivative instruments for speculative purposes.
The majority of the Company’s revenues in fiscal 2011 are transacted in U.S. dollars. However, portions of the revenues are
denominated in Canadian dollars, Euros, and British Pounds. 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. The Company enters into forward and option contracts to hedge portions of these anticipated transactions to reduce the
volatility on income associated with the foreign currency exposures. The Company also enters into forward and option contracts to
reduce the effects of foreign exchange gains and losses resulting from the revaluation of certain foreign currency monetary assets and
liabilities. At February 26, 2011 approximately 59% of cash and cash equivalents, 25% of accounts receivables and 8% of accounts
payable and accrued liabilities are denominated in foreign currencies (February 27, 2010 — 38%, 22% and 7%, respectively).
The Company enters into forward and option contracts to hedge exposures relating to foreign currency anticipated transactions.
These contracts have been designated as cash flow hedges, with the effective portion of the change in fair value initially recorded in
accumulated other comprehensive income and subsequently reclassified to income in the period in which the cash flows from the
associated hedged transactions affect income. Any ineffective portion of the change in fair value of the cash flow hedge is recognized
in current period income. As at February 26, 2011 and February 27, 2010, the derivatives designated as cash flow hedges were
considered to be fully effective with no resulting portions being designated as ineffective. The maturity dates of these instruments range
from March 2011 to April 2013. As at February 26, 2011, the net unrealized losses on these forward and option contracts was
$20 million (February 27, 2010 — net unrealized gains of $62 million; February 28, 2009 — net unrealized losses of $3 million).
Unrealized gains associated with these contracts were recorded in other current assets and accumulated other comprehensive income.
Unrealized losses were recorded in accrued liabilities and accumulated other comprehensive income. In fiscal 2012, $32 million of net
unrealized losses on these forward contracts will be reclassified to income.
RESEARCH IN MOTION ANNUAL REPORT 2011 77
RESEARCH IN MOTION LIMITED
Notes to the Consolidated Financial Statements
continued
In millions of United States dollars, except share and per share data, and except as otherwise indicated