Citrix 2009 Annual Report Download - page 120

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CITRIX SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
14. DERIVATIVE FINANCIAL INSTRUMENTS
Cash Flow Hedges
As of December 31, 2009, the Company’s derivative assets and liabilities resulted from cash flow hedges
related to its forecasted operating expenses transacted in local currencies. A substantial portion of the Company’s
overseas expenses are and will continue to be transacted in local currencies. To protect against fluctuations in
operating expenses and the volatility of future cash flows caused by changes in currency exchange rates, the
Company has established a program that uses foreign exchange forward contracts to hedge its exposure to these
potential changes. The terms of these instruments, and the hedged transactions to which they relate, generally do
not exceed 12 months and the maximum term is 18 months.
Generally, when the dollar is weak, foreign currency denominated expenses will be higher, and these higher
expenses will be partially offset by the gains realized from the Company’s hedging contracts. Conversely, if the
dollar is strong, foreign currency denominated expenses will be lower. These lower expenses will in turn be
partially offset by the losses incurred from the Company’s hedging contracts. The change in the derivative
component in accumulated other comprehensive income (loss) includes unrealized gains or losses that arose from
changes in market value of the effective portion of derivatives that were held during the period, and gains or
losses that were previously unrealized but have been recognized in the same line item as the forecasted
transaction in current period net income due to termination or maturities of derivative contracts. This
reclassification has no effect on total comprehensive income or stockholders’ equity.
The total cumulative unrealized gain (loss) on cash flow derivative instruments was $4.3 million and $(3.0)
million at December 31, 2009 and 2008, respectively, and is included in accumulated other comprehensive loss in
the accompanying consolidated balance sheets. The net unrealized gain as of December 31, 2009 is expected to be
recognized in income over the next twelve months at the same time the hedged items are recognized in income.
As of December 31, 2009, the Company had the following net notional foreign currency forward contracts
outstanding (in thousands):
Foreign Currency
Currency
Denomination
Australian dollars .............................................................. AUD 30,036
British pounds sterling .......................................................... GBP 24,803
Canadian dollars .............................................................. CAD 5,889
Danish krone ................................................................. DKK 6,216
Euro ........................................................................ EUR 42,171
Hong Kong dollars ............................................................. HKD 81,416
Indian rupees ................................................................. INR 868,483
Japanese yen ................................................................. JPY 1,067,100
Singapore dollars .............................................................. SGD 11,925
Swiss francs .................................................................. CHF 14,513
Derivatives not Designated as Hedges
The Company utilizes certain derivative instruments that either do not qualify or are not designated for
hedge accounting treatment under the authoritative guidance. Accordingly, changes in the fair value of these
contracts are recorded in other income (expense), net.
A substantial portion of the Company’s overseas assets and liabilities are and will continue to be
denominated in local currencies. To protect against fluctuations in earnings caused by changes in currency
F-40