Adaptec 2010 Annual Report Download - page 65

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Intangible assets acquired, and their respective estimated remaining useful lives, over which each asset will be amortized on a
straight-line basis, are:
In connection with this acquisition, the Company incurred $0.2 million and $3.2 million in acquisition-related costs which were
expensed and recognized as cost of revenues and selling, general and administrative, respectively.
NOTE 3. DERIVATIVE INSTRUMENTS
The Company generates revenues in U.S. dollars but incurs a portion of its operating expenses in various foreign currencies,
primarily the Canadian dollar. To minimize the short-term impact of foreign currency fluctuations on the Company’s operating
expenses, the Company uses currency forward contracts.
Currency forward contracts that are used to hedge exposures to variability in forecasted foreign currency cash flows are
designated as cash flow hedges. The maturities of these instruments are less than twelve months. For these derivatives, the gain or
loss from the effective portion of the hedge is initially reported as a component of other comprehensive income in stockholders’
equity and subsequently reclassified to earnings in the same period in which the hedged transaction affects earnings. The gain or loss
from the ineffective portion of the hedge is recognized as interest income or expense immediately.
At December 26, 2010, the Company had 24 currency forward contracts outstanding (2009—18 currency forward contracts
outstanding) that qualified and were designated as cash flow hedges. The U.S. dollar notional amount of these contracts was $44.3
million (2009—$27.8 million) and the contracts had a fair value of $1.3 million gain (2009—fair value of $0.8 million). No portion o
f
the hedging instrument’s gain or loss was excluded from the assessment of effectiveness. The ineffective portions of hedges had no
significant impact on earnings, nor are they expected to over the next twelve months.
NOTE 4. FAIR VALUE MEASUREMENTS
ASC Topic 820 specifies a hierarchy of valuation techniques which requires an entity to maximize the use of observable inputs
that may be used to measure fair value:
Level 1—Quoted prices in active markets are available for identical assets and liabilities. The Company’s Level 1 assets include
cash equivalents, short-term investments, and long-term investment securities, which are generally acquired or sold at par value and
are actively traded.
Level 2—Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; or other inputs that
are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. The
Company’s Level 2 liabilities include forward currency contracts whose value is determined using a pricing model with inputs that
are observable in the market or corroborated with observable market data. Level 2 observable inputs were used in estimating interest
rates used to determine the fair value of the debt component the Company’s senior convertible notes (see Note 1. Summary of
Significant Accounting Policies and Note 11. Long-Term Debt).
64
(in thousands)
Estimated
fair value
Estimated
average remaining
useful life
Technolo
gy
and
p
atents
$10,10
0
3 to 9
y
ears
Customer/ Distributor relationshi
p
s
7,50
0
2 to 6
y
ears
Trademarks and other
3,70
0
6
y
ears
Total intan
g
ible assets ac
q
uired
$21,30
0