Juno 2013 Annual Report Download - page 104

Table of Contents




statements of operations. The Company presents the cash flows of net investment hedges in investing activities in the consolidated statements of cash
flows.
Cash Flow Hedges—The Company enters into forward foreign currency exchange contracts designated as cash flow hedges to hedge certain
forecasted expense transactions occurring up to 12 months in the future and denominated in currencies other than the U.S. Dollar. The Company
initially reports the gains or losses related to the effective portion of the hedges as a component of accumulated other comprehensive loss in the
consolidated balance sheets and subsequently reclassifies the forward foreign currency exchange contracts' gains or losses to technology and
development expenses when the hedged expenses are recorded. The Company excludes the change in the time value of the forward foreign currency
exchange contracts from its assessment of their hedge effectiveness. Gains or losses related to the change in time value of the forward foreign currency
exchange contracts are immediately recognized in other income, net, along with any ineffectiveness. The Company presents the cash flows from cash
flow hedges in the same category in the consolidated statements of cash flows as the category for the cash flows from the hedged items.
Other Derivatives—Other derivatives not designated as hedging instruments consist of forward foreign currency exchange contracts that the
Company uses to hedge intercompany transactions and partially offset the economic effect of fluctuations in foreign currency exchange rates. The
Company recognizes realized and unrealized gains and losses on these contracts in other income, net. The Company presents the cash flows of other
derivatives in investing activities in the consolidated statements of cash flows.
For additional information related to derivative instruments, see Note 5—"Derivative Instruments".
—ASC 820, , establishes a three-tiered hierarchy that draws a
distinction between market participant assumptions based on (i) quoted prices (unadjusted) in active markets for identical assets and liabilities (Level 1);
(ii) inputs other than quoted prices in active markets that are observable either directly or indirectly (Level 2); and (iii) unobservable inputs that require
the Company to use present value and other valuation techniques in the determination of fair value (Level 3). In accordance with ASC 820, the
Company maximizes the use of observable inputs and minimizes the use of unobservable inputs when developing fair value measurements. When
available, the Company uses quoted market prices to measure fair value. If market prices are not available, fair value measurement is based upon models
that use primarily market-based or independently-sourced market parameters. If market observable inputs for model-based valuation techniques are not
available, the Company will be required to make judgments about assumptions market participants would use in estimating the fair value of the financial
instrument. Fair values of cash and cash equivalents, short-term accounts receivable, accounts payable, accrued liabilities, and short-term borrowings
approximate their carrying amounts because of their short-term nature. Time deposits, which are included in cash equivalents, are valued at amortized
cost, which approximates fair value. Derivative instruments are recognized in the consolidated balance sheets at their fair values based on third-party
inputs. The fair values of the forward foreign currency exchange contracts are calculated based on income approach observable market inputs adjusted
for counterparty risk of nonperformance. The key assumptions used in calculating the fair value of these derivative instruments are the forward foreign
currency exchange rates and discount rate.
F-12