LeapFrog 2006 Annual Report Download - page 86

LEAPFROG ENTERPRISES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share and percent data)
considered when quantifying misstatements in the current year financial statements. SAB 108 requires registrants
to quantify misstatements using both an income statement (“rollover”) and balance sheet (“iron curtain”)
approach and evaluate whether either approach results in a misstatement that, when all relevant quantitative and
qualitative factors are considered, is material. If prior year errors that had been previously considered immaterial
now are considered material based on either approach, no restatement is required so long as management
properly applied its previous approach and all relevant facts and circumstances were considered. If prior years
are not restated, the cumulative effect adjustment is recorded in opening accumulated earnings (deficit) as of the
beginning of the fiscal year of adoption. SAB 108 is effective for fiscal years ending on or after November 15,
2006, with earlier adoption encouraged. The Company adopted the bulletin during 2006. The adoption did not
have a material effect on the Company’s consolidated financial statements.
In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS 157”). SFAS 157
defines fair value, establishes a framework for measuring fair value and expands disclosure of fair value
measurements. SFAS 157 applies under other accounting pronouncements that require or permit fair value
measurements and accordingly, does not require any new fair value measurements. SFAS 157 is effective for
financial statements issued for fiscal years beginning after November 15, 2007. We have not determined the
impact of the adoption of SFAS 157 in our consolidated financial statements.
3. Fair Value of Financial Instruments
At December 31, 2006 and 2005, the carrying values of the Company’s financial instruments, including
cash and cash equivalents, short-term investments, foreign exchange transactions, receivables, accounts payable
and accrued liabilities, approximated their fair values.
4. Investments
Available-for-sale securities consisted of the following classified by original maturity date:
Maturing within
At December 31, 2006 1YR 2YR 5YR
5to10
YR
Over 10
YR Total
Auction rate certificates ......................... $ — $— $ — $8,499 $52,300 $60,799
Commercial Paper ............................. 19,985 — — — — 19,985
Total short-term investments ................. $19,985 $— $ — $8,499 $52,300 $80,784
At December 31, 2005 1YR 2YR 5YR
5to10
YR
Over 10
YR Total
Auction rate preferred securities .................. $ — $— $ — $ — $ 1,300 $ 1,300
Auction rate certificates ......................... 1,000 — 1,000 — 20,350 22,350
Total short-term investments ................. $ 1,000 $— $1,000 $ — $21,650 $23,650
At December 31, 2006 and 2005, short-term investments included certificates issued by various states of the
United States totaling $43,250 and $19,350 respectively.
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