EMC 2010 Annual Report Download - page 54

Table of Contents
EMC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
designated as cash flow hedges is recognized in current earnings. The ineffective portion of the derivatives includes gains or losses associated with differences
between actual and forecasted amounts. Our cash flow hedges generally mature within six months or less. The notional amount of cash flow hedges
outstanding as of December 31, 2010, 2009 and 2008 were $152 million, $108 million and $149 million, respectively.
We do not engage in currency speculation. For purposes of presentation within the consolidated statement of cash flows, derivative gains and losses are
presented within net cash provided by operating activities.
In 2010, EMC entered into interest rate swap contracts with an aggregate notional amount of approximately $900 million. These swaps were designated
as cash flow hedges of the forecasted issuance of debt in 2011 when our $1.725 billion 1.75% convertible senior notes become due. As such, the gain or loss
on these hedges will be recognized in other comprehensive loss until the underlying exposure is realized.
Our derivatives and their related activities are not material to our Consolidated Balance Sheet or Consolidated Income Statement.
Cash and Cash Equivalents
Cash and cash equivalents include highly liquid investments with a maturity of ninety days or less at the time of purchase. Cash equivalents consist
primarily of money market securities, U.S. treasury bills, U.S. agency discount notes and short-term commercial paper. Cash equivalents are stated at fair
value. Total cash equivalents were $2,584.4 million and $5,101.5 million at December 31, 2010 and 2009, respectively. See Note F.
Allowance for Doubtful Accounts
We maintain an allowance for doubtful accounts for the estimated probable losses on uncollectible accounts and notes receivable. The allowance is
based upon the creditworthiness of our customers, our historical experience, the age of the receivable and current market and economic conditions.
Uncollectible amounts are charged against the allowance account. The allowance for doubtful accounts is maintained against both our current and non-current
accounts and notes receivable balances. The balances in the allowance accounts at December 31, 2010 and 2009 were as follows (table in thousands):
December 31,
2010 2009
Current $ 57,385 $ 47,414
Non-current (included in other assets, net) 3,150 3,700
$ 60,535 $ 51,114
Investments
Unrealized gains and temporary loss positions on investments classified as available-for-sale are included within accumulated other comprehensive
income (loss), net of any related tax effect. Upon realization, those amounts are reclassified from accumulated other comprehensive income (loss) to
investment income. Realized gains and losses and other-than-temporary impairments are reflected in the consolidated income statement in investment income.
Inventories
Inventories are stated at the lower of cost (first-in, first-out) or market, not in excess of net realizable value.
Property, Plant and Equipment
Property, plant and equipment are recorded at cost. Buildings under development are included in building construction in progress. Depreciation
commences upon placing the asset in service and is recognized on a straight-line basis over the estimated useful lives of the assets, as follows:
Furniture and fixtures 5-7 years
Equipment and software 2-5 years
Improvements 5-15 years
Buildings 10-51 years
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