Plantronics 2011 Annual Report Download - page 53

Recently Issued Pronouncements
In May 2011, the FASB issued ASU 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure
Requirements in U.S. GAAP and IFRSs ("ASU 2011-04"), which amends ASC 820, Fair Value Measurement. ASU 2011-04 does
not extend the use of fair value accounting, but provides guidance on how it should be applied where its use is already required
or permitted by other standards within U.S. GAAP or International Financial Reporting Standards (“IFRSs”). ASU 2011-14
changes the wording used to describe many requirements in U.S. GAAP for for measuring fair value and for disclosing information
about fair value measurements. Additionally, ASU 2011-14 clarifies the FASB's intent about the application of existing fair value
measurements. ASU 2011-04 is effective for interim and annual periods beginning after December 15, 2011 and is applied
prospectively; therefore, we will adopt ASU 2011-04 in our fourth quarter of fiscal 2012. We do not expect the adoption of ASU
2011-04 to have a material impact on our consolidated financial statements.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The following discusses our exposure to market risk related to changes in interest rates and foreign currency exchange rates. This
discussion contains forward-looking statements that are subject to risks and uncertainties. Actual results could vary materially as
a result of a number of factors including those set forth in "Risk Factors Affecting Future Operating Results."
INTEREST RATE AND MARKET RISK
We had cash and cash equivalents totaling $284.4 million at March 31, 2011 compared to $350.0 million at March 31, 2010. We
had short-term investments totaling $145.6 million as of March 31, 2011 compared to $19.2 million at March 31, 2010. We had
long-term investments of $39.3 million as of March 31, 2011 and no long-term investments as of March 31, 2010. Cash equivalents
have a remaining maturity of three months or less at the date of purchase; short-term securities have a remaining maturity of greater
than three months at the date of purchase and an effective maturity of less than one year; and long-term investments have effective
maturities greater than one year, or we do not currently have the ability to liquidate the investment. As of March 31, 2010, all of
our ARS portfolio was held in our name at one major financial institution and was concentrated primarily in student loans. The
ARS were classified as short-term trading securities due to management’s intent to exercise the put option with UBS and the
expectation that the ARS would be sold within twelve months. The ARS were sold at par value at the end of June 2010. As of
March 31, 2011, our investments were composed of U.S. Treasury Bills, Government Agency Securities, Commercial Paper, U.S.
Corporate Bonds and CDs.
Our investment policy and strategy are focused on preservation of capital and supporting our liquidity requirements. A portion
of our cash is managed by external managers within the guidelines of our investment policy. Our exposure to market risk for
changes in interest rates relates primarily to our investment portfolio. We typically invest in highly rated securities and our policy
generally limits the amount of credit exposure to any one issuer. Our investment policy requires investments to be high credit
quality, primarily rated A or A2, with the objective of minimizing the potential risk of principal loss. All highly liquid investments
with initial maturities of three months or less at the date of purchase are classified as cash equivalents. We classify our investments
as either short-term or long-term based on each instrument's underlying maturity date. All short-term investments have effective
maturities less than 12 months, while all long-term investments have effective maturities greater than 12 months. We may sell
our investments prior to their stated maturities for strategic purposes, in anticipation of credit deterioration, or for duration
management. We recognized no material realized or unrealized net gains or losses during the years ended March 31, 2011 and
2010.
Interest rates declined in the year ended March 31, 2011 compared to the prior year. During the year ended March 31, 2011, we
generated no significant interest income from our portfolio of cash equivalents and investments. A hypothetical increase or decrease
in our interest rates by 10 basis points would have a minimal impact on our interest income.
FOREIGN CURRENCY EXCHANGE RATE RISK
We are exposed to currency fluctuations, primarily in the Euro ("EUR"), Great Britain Pound ("GBP"), Australian Dollar ("AUD")
and the Mexican Peso ("MX$"). We use a hedging strategy to diminish, and make more predictable, the effect of currency
fluctuations. All of our hedging activities are entered into with large financial institutions, which we periodically evaluate for
credit risks. We hedge our balance sheet exposure by hedging EUR, GBP and AUD denominated cash balances, receivables, and
payables, and our economic exposure by hedging a portion of anticipated EUR and GBP denominated sales and our MX$
denominated expenditures. We can provide no assurance that our strategy will be successful in the future and that exchange rate
fluctuations will not materially adversely affect our business.
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