Adobe 2008 Annual Report Download - page 107

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107
The following table summarizes the net realized and unrealized gains and losses from our investments for fiscal 2008,
2007 and 2006.
2008
2007
2006
Net gains (losses) related to our investments in Adobe
Ventures and cost method investments ..............
$
15,853
$
6,951
$
(6,487
)
Write-downs due to other-than-temporary declines in
value of our marketable equity securities ............
(4,895
)
—
—
Losses on stock warrants ...........................
(6
)
(21
)
(226
)
Other investment gains .............................
5,457
204
67,962
Total investment gains and (losses), net .............
$
16,409
$
7,134
$
61,249
During fiscal 2008, investment gains increased as compared to fiscal 2007 due primarily to realized and unrealized gains
from our direct and Adobe Ventures investments of $9.8 million and $6.0 million, respectively. Additionally, during fiscal
2008, we received cash and recognized a gain resulting from the expiration of the escrow period related to the sale of our
investment in Atom Entertainment, Inc. that occurred during the fourth quarter of fiscal 2006. Investment gains were higher
in fiscal 2006 when compared to fiscal 2007 due to this sale of our investment in Atom Entertainment, Inc. As a result of the
sale, we received $82.3 million in cash. Our carrying value was $13.2 million at the date of sale. See Note 6 for further
information regarding our long-term investments and Adobe Ventures.
Foreign currency derivatives include option and forward foreign exchange contracts primarily for the Japanese Yen and
the Euro.
Hedge Accounting
In accordance with SFAS 133, we recognize derivative instruments and hedging activities as either assets or liabilities
on the balance sheet and measure them at fair value. Gains and losses resulting from changes in fair value are accounted for
depending on the use of the derivative and whether it is designated and qualifies for hedge accounting.
Economic Hedging—Hedges of Forecasted Transactions
We may use foreign exchange option contracts or forward contracts to hedge certain operational (“cash flow”)
exposures resulting from changes in foreign currency exchange rates. Such cash flow exposures result from portions of our
forecasted revenue denominated in currencies other than the U.S. dollar, primarily the Japanese Yen and the Euro. These
foreign exchange contracts, carried at fair value, may have maturities between one and twelve months. The maximum
original duration of any contract is twelve months. We enter into these foreign exchange contracts to hedge forecasted
product licensing revenue in the normal course of business and accordingly, they are not speculative in nature.
To receive hedge accounting treatment, all hedging relationships are formally documented at the inception of the hedge,
and the hedges must be highly effective in offsetting changes to future cash flows on hedged transactions. We record changes
in the intrinsic value of these cash flow hedges in accumulated other comprehensive income until the forecasted transaction
occurs.
The following is a summary of the existing gains that are currently included in accumulated other comprehensive
income. These amounts represent the fair value of our cash flow hedge contracts that were still open as of the periods below.
Accumulated
Other Comprehensive
Income
Fiscal Years
Gain on hedges of forecasted transactions:
2008
2007
2006
Net unrealized gain remaining in other accumulated
comprehensive income, net of tax
...................
$
41,750
$
31
$
567