Plantronics 2010 Annual Report Download - page 64

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Cash and Cash Equivalents
All highly liquid investments with remaining maturities of three months or less at the date of purchase are classified as cash
equivalents.
Investments
The goals of the Company’s investment policy, in order of priority, are preservation of capital, maintenance of liquidity,
diversification, and maximization of after-tax investment income. Investments are limited to investment grade securities with
limitations by policy on the percent of the total portfolio invested in any one issue. All of the Company’s investments are held in the
Company’s name at a limited number of major financial institutions. Short-term securities have a remaining maturity of greater than
three months at the date of purchase, and long-term investments have maturities greater than one year or we do not currently have the
ability to liquidate the investment. As of March 31, 2009, the Company’s Auction Rate Securities (“ARS”) that the Company did not
have the ability and intent to liquidate within the next twelve months were classified as long-term investments. As of March 31, 2010,
the Company’s ARS portfolio is classified as a short-term trading security due to management’s intent to exercise the put option with
UBS and the expectation that the ARS will be sold within twelve months. (See Note 6)
Investments are carried at fair value based upon quoted market prices at the end of the reporting period where available. The
Company’s ARS investments are carried at fair value based on a discounted cash flow model. As of March 31, 2010, all investments,
except the ARS portfolio, are classified as available-for-sale with unrealized gains and losses recorded as a separate component of
Accumulated other comprehensive income in Stockholders’ equity. The specific identification method is used to determine the cost of
securities disposed of, with realized gains and losses reflected in Interest and other income (expense), net.
Impairment on investments is determined pursuant to the Investments - Debt and Equity Securities Topic of the Financial Accounting
Standards Board (“FASB”) Accounting Standards Codification (“ASC”) in order to determine the classification of the impairment as
“temporary” or “other-than-temporary”. A temporary impairment charge results in an unrealized loss being recorded as a separate
component of Accumulated other comprehensive income (loss) in Stockholders’ Equity. Such an unrealized loss does not affect net
income (loss) for the applicable accounting period. An other-than-temporary impairment charge is recorded as a realized loss in
Interest and other income (expense), net in the Consolidated statement of operations and reduces net income for the applicable
accounting period. The differentiating factors between temporary and other-than-temporary impairment are primarily the length of the
time and the extent to which the market value has been less than cost, the financial condition and near-term prospects of the issuer and
the intent and ability of Plantronics to retain its investment in the issuer for a period of time sufficient to allow for any anticipated
recovery in market value.
Derivatives
The Company accounts for its derivative instruments as either assets or liabilities and carries them at fair value. The accounting for
changes in the fair value of a derivative depends on the intended use of the derivative and the resulting designation. For derivative
instruments designated as a fair value hedge, the gain or loss is recognized in earnings in the period of change together with the
offsetting loss or gain on the hedged item attributed to the risk being hedged. For a derivative instrument designated as a cash flow
hedge, the effective portion of the derivative’s gain or loss is initially reported as a component of Accumulated other comprehensive
income in Stockholders’ equity and subsequently reclassified into earnings when the hedged exposure affects earnings. The
ineffective portion of the gain or loss is reported in earnings immediately. For derivative instruments that are not designated as
accounting hedges under the Derivatives and Hedging Topic of the FASB ASC, changes in fair value are recognized in earnings in the
period of change. The Company does not hold or issue derivative financial instruments for speculative trading purposes. Plantronics
enters into derivatives only with counterparties that are among the largest U.S. banks, ranked by assets, in order to minimize its credit
risk and to date, no such counterparty has failed to meet its financial obligations under such contracts. (See Note 14)
Allowance for Doubtful Accounts
The Company maintains allowances for doubtful accounts for estimated losses resulting from the inability of its customers to make
required payments. Plantronics regularly performs credit evaluations of its customers’ financial conditions and considers factors such
as historical experience, credit quality, age of the accounts receivable balances, and geographic or country-specific risks and economic
conditions that may affect a customer’s ability to pay. The allowance for doubtful accounts is reviewed quarterly and adjusted if
necessary based on management’s assessment of a customer’s ability to pay. If the financial condition of customers should
deteriorate, additional allowances may be required which could have an adverse impact on operating expenses.