VMware 2010 Annual Report Download - page 89

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Table of Contents
VMware, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
VMware’
s valuation inputs for foreign currency forward contracts are based on quoted prices and quoted pricing intervals from public data
sources. These contracts are typically classified within Level 2 of the fair value hierarchy and are discussed below in the derivative instruments
section. VMware does not have any assets or liabilities that fall into Level 3 of the fair value hierarchy.
Derivative Instruments
In May 2009, VMware started to invoice and collect in the Euro, the British Pound, the Japanese Yen and the Australian Dollar in their
respective regions. Since July 2009, in order to manage its exposure to foreign currency fluctuations, VMware has entered into foreign currency
forward contracts to hedge a portion of its net outstanding monetary assets and liabilities against movements in certain foreign exchange rates.
These forward contracts are not designated as hedging instruments under applicable accounting guidance, and therefore all changes in the fair
value of the forward contracts are reported in other income (expense), net in the consolidated statements of income. The gains and losses on
VMware’s foreign currency forward contracts generally offset the majority of the gains and losses associated with the underlying foreign-
currency denominated assets and liabilities that VMware hedges. VMware does not enter into speculative foreign exchange contracts for trading
purposes.
VMware’s foreign currency forward contracts are generally traded on a monthly basis with a typical contractual term of one month. As of
December 31, 2010, VMware had outstanding forward contracts with a total notional value of $238.9 million. The fair value of these forward
contracts was immaterial as of December 31, 2010 and therefore excluded from the table above. The fair value was measured under Level 2
sources as discussed above.
E. Business Combinations, Goodwill and Intangible Assets, Net
Business Combinations
The results of operations of all acquired companies and transferred net assets mentioned below have been included in VMware’s
consolidated financial statements from the respective dates of purchase or transfer, as applicable. Pro forma results of operations have not been
presented as the results of the acquired companies and transferred net assets, prior to being acquired by VMware, were not material, individually
or in aggregate, to the consolidated results of operations in the years ended December 31, 2010, 2009 or 2008.
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