Blackberry 2013 Annual Report Download - page 159

Research In Motion Limited
Notes to the Consolidated Financial Statements
In millions of United States dollars, except share and per share data, and except as otherwise indicated
The majority of the Company’s revenues for the fiscal year ended March 2, 2013 were 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 March 2, 2013 approximately 19%
of cash and cash equivalents, 29% of accounts receivables and 5% of accounts payable and accrued liabilities are denominated
in foreign currencies (March 3, 2012 – 38%, 30% and 11%).
The Company records all derivative instruments at fair value on the consolidated balance sheets. The fair value of these
instruments is calculated based on notional and exercise values, transaction rates, market quoted currency spot rates, forward
points and interest rate yield curves. The accounting for changes in the fair value of a derivative depends on the intended use of
the derivative instrument and whether it is designated as a hedge.
The Company’s accounting policies for these instruments outline the criteria to be met in order to designate a derivative
instrument as a hedge and the methods for evaluating 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 the value of the hedged items. If an anticipated transaction is deemed no longer likely to occur, the
corresponding derivative instrument is de-designated as a hedge and any associated deferred gains and losses in accumulated
other comprehensive income are recognized in income at that time. Any future changes in the fair value of the instrument are
recognized in current income.
For any derivative instruments that do not meet the requirements for hedge accounting, or for any derivative instrument for
which hedge accounting is not elected, the changes in fair value of the instruments are recognized in income in the current
period and will generally offset the changes in the fair value of the associated asset, liability, or forecasted transaction.
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. For fiscal year ended March 2, 2013, there was $8 million in realized gains on
forward contracts which were ineffective upon maturity (fiscal year ended March 3, 2012 - $2 million in realized losses). As at
March 2, 2013 and March 3, 2012, the outstanding derivatives designated as cash flow hedges were considered to be fully
effective. The maturity dates of these instruments range from March 2013 to February 2014. As at March 2, 2013, the net
unrealized loss on these forward and option contracts was $8 million (March 3, 2012 - net unrealized gain of $51 million).
Unrealized gains associated with these contracts were recorded in other current assets and accumulated other comprehensive
income (loss). Unrealized losses were recorded in accrued liabilities and accumulated other comprehensive income (loss). As at
March 2, 2013, the Company estimates that approximately $8 million of net unrealized losses on these forward and option
contracts will be reclassified into income within the next twelve months.
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