Adaptec 2004 Annual Report Download - page 62

Download and view the complete annual report

Please find page 62 of the 2004 Adaptec annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 103

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103

fair value of the asset. Long−lived assets classified as held for sale are reported at the lower of carrying value and fair value less
estimated selling costs. For assets to be disposed of other than by sale, an impairment loss is recognized when the carrying value is
not recoverable and exceeds the fair value of the asset.
Accrued liabilities. The components of accrued liabilities are as follows:
December 31,
(in thousands) 2004 2003
Accrued compensation and benefits $ 14,010 $ 18,062
Other accrued liabilities 26,185 32,178
$ 40,195 $ 50,240
Foreign currency translation. For all foreign operations, the U.S. dollar is used as the functional currency. Monetary assets and
liabilities in foreign currencies are translated into U.S. dollars using the exchange rate as of the balance sheet date. Revenues and
expenses are translated at average rates of exchange during the year. Gains and losses from foreign currency transactions are reported
separately under Other income (expense) on the Statement of Operations.
Derivatives and Hedging Activities. PMC’s net income (loss) and cash flows may be impacted by fluctuating foreign exchange rates.
The Company periodically hedges foreign currency forecasted transactions related to certain operating expenses. All derivatives are
recorded in the balance sheet at fair value. For a derivative designated as a fair value hedge, changes in the fair value of the derivative
and of the hedged item attributable to the hedged risk are recognized in net income (loss). For a derivative designated as a cash flow
hedge, the effective portions of changes in the fair value of the derivative are recorded in other comprehensive income and are
recognized in net income (loss) when the hedged item affects net income (loss). Ineffective portions of changes in the fair value of
cash flow hedges are recognized in net income (loss). If the derivative used in an economic hedging relationship is not designated in
an accounting hedging relationship or if it becomes ineffective, changes in the fair value of the derivative are recognized in net income
(loss).
Fair value of financial instruments. The estimated fair value of financial instruments has been determined by the Company using
available market information and appropriate valuation methodologies. However, considerable judgment is required in interpreting
market data to develop the estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the
amounts that the Company could realize in a current market exchange.
The Company’s carrying value of cash equivalents, restricted cash, accounts receivable and accounts payable approximates fair value
because of their short maturities.
The fair value of the Company’s short−term investments, and investment in bonds and notes are determined using estimated market
prices provided for those securities (see Note 4). The fair value of investments in public companies is determined using quoted market
prices for those securities. The fair value of investments in non−public entities is not readily determinable due to
56