Juno 2014 Annual Report Download - page 93

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Table of Contents




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
transactions are recorded in earnings. 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, and accrued liabilities 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.
—Goodwill represents the excess of the purchase price of an acquired entity over the fair value of the net tangible and intangible assets
acquired. The Company accounts for goodwill in
F-11