Ingram Micro 2010 Annual Report Download - page 57

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Our 2009 acquisitions of Value Added Distributors Limited (“VAD”) and Vantex Technology Distribution
Limited (“Vantex”) in Asia Pacific yielded additional goodwill of $2,490. In light of the continued weak demand for
IT products and services in Asia Pacific and globally in 2009, our Asia Pacific reporting unit fair value continued to
be below the carrying value of its assets. As such, we recorded a charge for the full impairment of the newly
recorded goodwill from these two acquisitions in 2009.
Following these impairment charges, we have no goodwill as of January 1, 2011 and January 2, 2010.
Concentration of Credit Risk
Financial instruments that potentially subject us to significant concentrations of credit risk consist principally
of cash and cash equivalents, trade accounts receivable from customers and vendors, as well as derivative financial
instruments. Our cash and cash equivalents are deposited and/or invested with various financial institutions globally
that are monitored by us regularly for credit quality. Credit risk with respect to trade accounts receivable is limited
due to the large number of customers and their dispersion across geographic areas. No single customer has
accounted for 10% or more of our consolidated net sales and no customer accounts receivable balance was greater
than 10% at January 1, 2011. However, one retail customer in EMEA accounted for approximately 11% of our
outstanding consolidated trade accounts receivable at January 2, 2010, the majority of which was covered by credit
insurance. We perform ongoing credit evaluations of our customers’ financial conditions, obtain credit insurance in
certain locations and require collateral in certain circumstances. We maintain an allowance for estimated credit
losses.
Derivative Financial Instruments
We operate in various locations around the world. We reduce our exposure to fluctuations in foreign exchange
rates by creating offsetting positions through the use of derivative financial instruments in situations where there are
not offsetting balances that create a natural hedge. The market risk related to the foreign exchange agreements is
offset by changes in the valuation of the underlying items being hedged. In accordance with our policy, we do not
use derivative financial instruments for trading or speculative purposes, nor are we a party to leveraged derivatives.
Foreign exchange risk is managed primarily by using forward contracts to hedge foreign currency-denom-
inated receivables, payables and intercompany loans and expenses. Interest rate swaps and forward contracts are
used to hedge foreign currency-denominated principal and interest payments related to intercompany loans.
All derivatives are recorded in our consolidated balance sheet at fair value. The estimated fair value of
derivative financial instruments represents the amount required to enter into similar offsetting contracts with similar
remaining maturities based on quoted market prices. Changes in the fair value of derivatives not designated as cash
flow hedges are recorded in current earnings.
The notional amount of forward exchange contracts is the amount of foreign currency bought or sold at
maturity. The notional amount of interest rate swaps is the underlying principal amount used in determining the
interest payments exchanged over the life of the swap. Notional amounts are indicative of the extent of our
involvement in the various types and uses of derivative financial instruments but are not a measure of our exposure
to credit or market risks through our use of derivatives.
Credit exposure for derivative financial instruments is limited to the amounts, if any, by which the counter-
parties’ obligations under the contracts exceed our obligations to the counterparties. We manage the potential risk of
credit losses through careful evaluation of counterparty credit standing, selection of counterparties from a limited
group of financial institutions and other contract provisions.
49
INGRAM MICRO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)