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Table of Contents
Recent Accounting Pronouncements
In June 2011, the FASB issued new accounting guidance on the presentation of comprehensive income to provide companies with two options for
presenting comprehensive income. Companies can present the total of comprehensive income, the components of net income, and the components of
other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. This
guidance eliminates the option to present the components of other comprehensive income as part of the statement of changes in stockholders’ equity.
This guidance was effective for the us on January 1, 2012. As the new guidance relates only to how comprehensive income is disclosed and does not
change the items that must be reported as comprehensive income, we do not believe the adoption of this standard will have a material impact on our
financial position or results of operations.
In September 2011, the FASB issued ASU No. 2011-08, Testing Goodwill for Impairment (the revised standard) . The revised standard is
intended to reduce the cost and complexity of the annual goodwill impairment test by providing entities an option to perform a “qualitative” assessment
to determine whether further impairment testing is necessary. The revised standard was effective for us on January 1, 2012. We do not believe the
adoption of this amendment will have a material impact on our financial position or results of operations.
We are exposed to market risks in the ordinary course of our business. These risks include primarily interest rate fluctuation risks and foreign
exchange risks.
Interest Rate Fluctuation Risk
Our cash consists of interest bearing bank accounts. We did not have long-term borrowings as of December 31, 2011. Interest income is sensitive
to changes in the general level of U.S. interest rates. The primary objective of our investment activities is to preserve principal while maximizing income
without significantly increasing risk. Our cash and short-term investments are relatively insensitive to interest rate changes. In future periods, we will
continue to evaluate our investment policy in order to ensure that we continue to meet our overall objectives. In the event that we borrow under our
revolving credit facility, which bears interest at the lender’s prime rate plus 1%, we would be exposed to interest rate fluctuations.
Foreign Currency Exchange Risk
We have foreign currency risks related to our operating expenses and potential revenue denominated in currencies other than the U.S. dollar,
principally the Chinese Yuan. We do not believe movements in the foreign currencies in which we transact will significantly affect future net earnings.
Foreign currency risk can be quantified by estimating the change in cash flows resulting from a hypothetical 10% adverse change in foreign exchange
rates. We believe such a change would not have a material impact on our results of operations.
49
I
TEM 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK