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Table of Contents
In February 2013, the FASB issued amended guidance on how to report the effect of significant reclassifications out of accumulated other
comprehensive income. The amendment becomes effective prospectively for reporting periods beginning after December 15, 2012 for public entities
and earlier adoption is permitted. The adoption of this guidance is not expected to have a material effect on our consolidated financial statements.
I
n June 2013, the FASB issued amended guidance on the financial statement presentation of an unrecognized tax benefit when a net operating
loss carryforward, a similar tax loss, or a tax credit carryforward exists. The amendment becomes effective for public companies for annual periods
beginning after December 15, 2013, and interim periods within those periods on a prospective basis to all unrecognized tax benefits that exist at the
effective date and early adoption is permitted. The result of adoption may result in the reclassification of certain long term liabilities to long term
deferred tax assets, but the adoption will not result in a change to the tax provision. The adoption of this guidance is not expected to have a material
effect on our consolidated financial statements.
Interest rate sensitivity . The primary objectives of our investment activities are to preserve principal, provide liquidity and maximize income
without significantly increasing risk. By policy, we do not enter into investments for trading or speculative purposes. Some of the securities we invest
in are subject to market risk. This means that a change in prevailing interest rates may cause the fair value of the investment to fluctuate. To minimize
this risk, we invest in a variety of securities, which primarily consist of money market funds, commercial paper, municipal securities and other debt
securities of domestic corporations. Due to the nature of these investments and relatively short duration of the underlying securities, we believe that
we do not have any material exposure to changes in the fair value of our investment portfolio as a result of changes in interest rates. Declines in
interest rates, however, will reduce future interest income. A 10% appreciation or depreciation in interest rates in fiscal 2013 would not have had a
material impact on our interest income or the fair value of our marketable securities.
Foreign currency risk . A substantial majority of our revenue has been generated to date from our end users in the United States and, as such,
our revenue has not been substantially exposed to fluctuations in currency exchange rates. However, some of our contracts with our customers
outside of the United States are denominated in currencies other than the U.S. dollar and therefore expose us to foreign currency risk. Should the
revenue generated outside of the United States grow in absolute amounts and as a percentage of our revenue, we will increasingly be exposed to
foreign currency exchange risks. In addition, a portion of our operating expenses are incurred outside the United States, are denominated in foreign
currencies and are subject to changes in foreign currency exchange rates, particularly the Chinese Renminbi, or RMB. Additionally, changes in
foreign currency exchange rates may cause us to recognize transaction gains and losses in our statement of income. An immediate 10% adverse
change in exchange rates on foreign denominated receivables and payables as of June 30, 2013 would not have resulted in a material loss.
To date, we have not used any foreign currency forward contracts or similar instruments to attempt to mitigate our exposure to changes in
foreign currency rates.
The response to this item is submitted as a separate section of this Form 10-K. See Part IV, Item 15.
None.
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our chief executive officer and our chief financial officer, evaluated the effectiveness of our
disclosure controls and procedures as of June 30, 2013 . The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e)
under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a
company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods
specified in the SEC’s rules and forms.
54
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
ITEM 9A. CONTROLS AND PROCEDURES