Avid 2008 Annual Report Download - page 61

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branch and the parent. The assets and liabilities of the subsidiaries whose functional currencies are other than the U.S.
dollar are translated into U.S. dollars at the current exchange rate in effect at the balance sheet date. Income and
expense items for these entities are translated using the average exchange rate for the period. Cumulative translation
adjustments are included in accumulated other comprehensive income (loss), which is reflected as a separate
component of stockholders’ equity.
The U.S. parent company and its Irish manufacturing branch, both of whose functional currency is the U.S. dollar,
carry monetary assets and liabilities denominated in currencies other than the U.S. dollar. These assets and liabilities
typically include cash, accounts receivable and intercompany operating balances denominated in the euro, pound
sterling, Japanese yen, Swedish krona, Danish kroner, Norwegian krone, Canadian dollar, Singapore dollar, Australian
dollar and Korean won. These assets and liabilities are remeasured into the U.S. dollar at the current exchange rate in
effect at the balance sheet date. Foreign currency transaction and remeasurement gains and losses are included within
marketing and selling expenses in the results of operations.
The U.S. parent company and various other wholly-owned subsidiaries have long-term intercompany loan balances
denominated in foreign currencies that are remeasured into the U.S. dollar at the current exchange rate in effect at the
balance sheet date. Any gains and losses relating to these loans are included in the cumulative translation adjustment
account in the balance sheet.
Cash, Cash Equivalents and Marketable Securities
Cash equivalents consist primarily of commercial paper and money market investments. The Company considers all
debt instruments purchased with an original maturity of three months or less to be cash equivalents. Marketable
securities consist of certificates of deposit, commercial paper, asset-backed securities, agency bonds and discount
notes (see Note C). The Company generally invests in securities that mature within one year from the date of
purchase. The Company classifies its cash equivalents and marketable securities as “available for sale” and reports
them at fair value, with unrealized gains and losses excluded from earnings and reported as an adjustment to other
comprehensive income (loss), which is reflected as a separate component of stockholders’ equity. Amortization or
accretion of premium or discount is included in interest income (expense) in the results of operations.
Concentration of Credit Risk and Fair Value of Financial Instruments
Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash investments
and trade receivables. The Company places its excess cash in marketable investment grade securities. There are no
significant concentrations in any one issuer of debt securities. The Company places its cash, cash equivalents and
investments with financial institutions with high credit standing. Concentrations of credit risk with respect to trade
receivables are limited due to the large number of customers that make up the Company’s customer base and their
dispersion across different regions. No individual customer accounted for more than 10% of the Company’s net
accounts receivable as of December 31, 2008 or 2007. The Company also maintains reserves for potential credit losses
and such losses have been within management’s expectations.
In September 2006, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting
Standards (“SFAS”) No. 157, Fair Value Measurements, which defines fair value, establishes a framework for
measuring fair value in accordance with generally accepted accounting principles and expands disclosures about fair
value measurements. SFAS No. 157 does not require any new fair value measurements, but its provisions apply to all
other accounting pronouncements that require or permit fair value measurement. SFAS No. 157 was effective for the
Company’s fiscal year beginning January 1, 2008 and for interim periods within that year. In February 2008, the
FASB issued FASB Staff Position (“FSP”) No. 157-2, Effective Date of FASB Statement No. 157, which delayed for
one year the effective date of SFAS No. 157 for nonfinancial assets and nonfinancial liabilities, except for items that
are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). In
accordance with FSP No. 157-2, the Company deferred the application of the provisions of SFAS No. 157 to certain
nonfinancial assets and liabilities including reporting units measured at fair value in goodwill impairment tests,
nonfinancial assets and liabilities measured at fair value for impairment assessments and nonfinancial liabilities for
restructuring activities. As required, the Company adopted SFAS No. 157 for its financial assets on January 1, 2008.
Adoption did not have a material impact on the Company’s financial position or results of operations. The adoption of