Blizzard 2009 Annual Report Download - page 52
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atfairvalueunderASCSubtopic82510regardingthefairvalueoptionforfinancialassetsandfinancial
liabilities,whichpermitsanentitytomeasurecertainitemsatfairvalue,tomitigatevolatilityinreported
earningsfromthechangesinthefairvalueoftheARS.Asaresult,unrealizedgainsandlosseswillbe
includedinearningsinfutureperiods.WeexpectthatfuturechangesinthefairvalueoftheRightswill
largelymitigatefairvaluemovementsintherelatedARS.AtDecember31,2009,wehaveclassifiedour
investmentinARSheldthroughUBSasacurrentassetastheexpectedsettlementisJune30,2010.
RestrictedCash—CompensatingBalances
Mostofourrestrictedcashrelatestoastandbyletterofcreditrequiredbyoneofourinventory
manufacturerstoqualifyforpaymenttermsonourinventorypurchases.Underthetermsofthis
arrangement,wearerequiredtomaintainwiththeissuingbankacompensatingbalance,restrictedasto
use,ofnotlessthanthesumoftheavailableamountoftheletterofcreditplustheaggregateamountofany
drawingsundertheletterofcreditthathavebeenhonoredthereunder,butnotreimbursed.Restrictedcash
isincludedinshortterminvestments.
FinancialInstruments
Thecarryingamountofcashandcashequivalents,accountsreceivable,accountspayable,and
accruedexpensesisreasonableapproximationoffairvalueduetotheirshorttermnature.OurU.S.
governmentagencysecuritiesandmortgagebackedsecuritiesarecarriedatfairvaluewithfairvalues
estimatedbasedonquotedmarketpricesorestimatedbasedonquotedmarketpricesoffinancial
instrumentswithsimilarcharacteristics.BothshorttermandlongtermARSarecarriedatfairvaluewith
fairvaluesestimatedusinganincomeapproachmodel(specifically,adiscountedcashflowanalysis).We
carryderivativeinstruments,includingforeignexchangecontracts,inthebalancesheetasotherassetsor
liabilitiesattheirfairvalue.Thefairvalueofforeigncurrencycontractsisestimatedbasedonthe
prevailingexchangeratesofthevarioushedgedcurrenciesasoftheendoftheperiod.
ActivisionBlizzardtransactsbusinessinvariousforeigncurrenciesandhassignificant
internationalsalesandexpensesdenominatedinforeigncurrencies,subjectingActivisionBlizzardto
foreigncurrencyrisk.ActivisionBlizzardutilizesforeignexchangeforwardcontractsandswapsto
mitigateforeigncurrencyexchangerateriskassociatedwithforeigncurrencydenominatedassetsand
liabilities.Theforeignexchangeforwardcontractsgenerallyhavecontractualtermsoflessthanayear.
ActivisionBlizzarddoesnotuseforeignexchangeforwardcontractsforspeculativeortradingpurposes.
NoneofActivisionBlizzard’sforeignexchangeforwardcontractsweredesignatedashedginginstruments
underASCTopic815.Accordingly,gainsorlossesresultingfromchangesinthefairvaluesoftheforeign
exchangeforwardcontractsarereportedasinvestmentandotherincome(loss),netintheconsolidated
statementsofoperations.
OtherThanTemporaryImpairments
OnApril1,2009,weadoptedprospectivelyanewaccountingstandardaddressingtheevaluation
offixedmaturitysecuritiesforotherthantemporaryimpairments.Theserequirementshavealteredour
policiesandproceduresfordeterminingimpairmentchargesrecognizedthroughearnings.Thenew
standardrequiresacompanytorecognizeacreditcomponent(acreditimpairment)ofanotherthan
temporaryimpairmentofafixedmaturitysecurityinearningsandthenoncreditcomponentin
accumulatedothercomprehensiveincome(loss)ifthecompanydoesnotintend,oritismorelikelythan
notthatthecompanywillnotberequired,tosellthesecuritypriortorecoveryofthesecurity’samortized
costbasis.Thenewstandardalsochangesthethresholdfordeterminingwhenanotherthantemporary
impairmenthasoccurredonafixedmaturitysecuritywithrespecttointentandabilitytoholdthesecurity
untilrecoveryandrequiresadditionaldisclosures.Acreditimpairment,whichisrecognizedinearnings
whenitoccurs,isthedifferencebetweentheamortizedcostofthefixedmaturitysecurityandtheestimated
presentvalueofcashflowsexpectedtobecollected(recoveryvalue),asdeterminedbymanagement.The
differencebetweenfairvalueandamortizedcostthatisnotrelatedtoacreditimpairmentisrecognizedasa
separatecomponentofaccumulatedothercomprehensiveincome(loss),netoftaxes.Theadoptionofthis
standarddidnothaveamaterialimpactonourconsolidatedfinancialstatements.