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Table of Contents
EMC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
E. Derivatives
At December 31, 2006, the fair value of our foreign currency derivative contracts resulted in both an unrealized gain of $16.7 million classified in other
current assets and an unrealized loss of $18.2 million classified in accrued expenses. At December 31, 2005, the fair value of our foreign currency hedges
resulted in both an unrealized gain of $13.1 million classified in other current assets and an unrealized loss of $12.1 million classified in accrued expenses.
The following table summarizes activity in other comprehensive income related to derivatives held by us for 2006, 2005 and 2004 (table in thousands):
2006
2005
2004
Unrealized gains (losses) on derivative instruments, beginning of year $ 963 $ (31) $ —
Add: (decrease) increase in fair value of derivatives (7,002) 28,873 (9,500)
Less: (losses) gains reclassified into revenue or expenses (6,107) 27,879 (9,469)
Unrealized gains (losses) on derivative instruments, end of year $ 68 $ 963 $ (31)
As of December 31, 2006 the unrealized gains on derivative instruments consisted of gross unrealized gains of $0.5 million and gross unrealized losses
of $0.4 million. The net unrealized gain is expected to be reclassified into the income statement in 2007.
F. Fair Value of Financial Instruments
Fair Value
The carrying amounts reflected in our consolidated balance sheets for cash and cash equivalents, accounts and notes receivable, current portion of long-
term debt and accounts and notes payable approximate fair value due to the short maturities of these instruments.
The fair value of our long-term convertible debt at December 31, 2006 was $3,580.4 million, compared to a carrying amount of $3,450.0 million. The
fair value is based upon the trading price of the debt.
Investments
The following tables summarize the composition of our available for sale, short and long-term investments, at December 31, 2006 and 2005 (tables in
thousands). Fair value was determined based upon quoted market prices for the security.
December 31, 2006
Amortized
Cost Basis
Aggregate
Fair Value
U.S. government and agency obligations $ 1,077,756 $ 1,072,352
U.S. corporate debt securities 572,157 568,569
Asset and mortgage-backed securities 787,841 782,805
Municipal obligations 489,405 486,898
Auction rate securities 812,778 812,780
Foreign debt securities 44,996 44,811
Total $ 3,784,933 $ 3,768,215
December 31, 2005
Amortized
Cost Basis
Aggregate
Fair Value
U.S. government and agency obligations $ 1,593,877 $ 1,577,472
U.S. corporate debt securities 824,540 816,433
Asset and mortgage-backed securities 972,258 960,046
Bank loans 536,378 540,379
Municipal obligations 399,538 399,895
Auction rate securities 666,765 666,765