EMC 2008 Annual Report Download - page 62

Table of Contents
EMC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
required at a minimum on a quarterly basis. Absent meeting these criteria, changes in fair value are recognized currently in other expense, net, in the
consolidated income statement. Once the underlying forecasted transaction is realized, the gain or loss from the derivative designated as a hedge of the
transaction is reclassified from accumulated other comprehensive loss to the consolidated income statement, in the related revenue or expense caption, as
appropriate. In the event the underlying forecasted transaction does not occur, the amount recorded in accumulated other comprehensive loss will be
reclassified to other expense, net, in the consolidated income statement in the then-current period. Any ineffective portion of the derivatives designated as
cash flow hedges is recognized in current earnings. The ineffective portion of the derivatives includes gains or losses associated with differences between
actual and forecasted amounts. Our cash flow hedges generally mature within six months or less. The notional amount of cash flow hedges outstanding as of
December 31, 2008, 2007 and 2006 were $149 million, $86 million and $93 million, respectively.
We do not engage in currency speculation. For purposes of presentation within the consolidated statement of cash flows, derivative gains and losses are
presented within net cash provided by operating activities.
Cash and Cash Equivalents
Cash and cash equivalents include highly liquid investments with a maturity of ninety days or less at the time of purchase. Cash equivalents consist
primarily of money market securities, U.S. treasury bills, U.S. agency discount notes and short-term commercial paper. Cash equivalents are stated at fair
value. Total cash equivalents were $4,507.5 million and $2,290.6 million at December 31, 2008 and 2007, respectively. See Note F.
Allowance for Doubtful Accounts
We maintain an allowance for doubtful accounts for the estimated probable losses on uncollectible accounts and notes receivable. The allowance is based
upon the creditworthiness of our customers, our historical experience, the age of the receivable and current market and economic conditions. Uncollectible
amounts are charged against the allowance account. The allowance for doubtful accounts is maintained against both our current and non-current accounts and
notes receivable balances. The balances in the allowance accounts at December 31, 2008 and 2007 were as follows (table in thousands):
December 31,
2008 2007
Current $48,080 $34,389
Non-current (included in other assets, net) 2,500 1,500
$50,580 $35,889
Investments
Unrealized gains and temporary loss positions on investments classified as available for sale are included within accumulated other comprehensive loss,
net of any related tax effect. Upon realization, those amounts are reclassified from accumulated other comprehensive loss to investment income. Realized
gains and losses and other than temporary impairments are reflected in the consolidated income statement in investment income.
Inventories
Inventories are stated at the lower of cost (first-in, first-out) or market, not in excess of net realizable value.
56