Logitech 2008 Annual Report Download - page 51

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29
Foreign Currency Exchange Rates
The Company is exposed to foreign currency exchange rate risk as it transacts business in multiple
foreign currencies, including exposure related to anticipated sales, anticipated purchases and assets and
liabilities denominated in currencies other than the U.S. dollar. Logitech transacts business in over 30
currencies worldwide, of which the most significant to operations are the Euro, Chinese renminbi (“CNY”),
British pound sterling, Japanese yen, Taiwanese dollar, Canadian dollar and Mexican peso. The functional
currency of the Company’s operations is primarily the U.S. dollar. To a lesser extent, certain operations
use the Euro, Swiss franc, Japanese yen or the local currency of the country as their functional currencies.
Accordingly, unrealized foreign currency gains or losses resulting from the translation of net assets or
liabilities denominated in foreign currencies to the U.S. dollar are accumulated in the cumulative translation
adjustment component of other comprehensive income in shareholders’ equity.
The table below provides information about the Company’s underlying transactions that are sensitive
to foreign exchange rate changes, primarily assets and liabilities denominated in currencies other than
the functional currency, where the net exposure is greater than $0.5 million at March 31, 2008. The table
below represents the U.S. dollar impact on earnings of a 10% appreciation and a 10% depreciation of the
functional currency as compared with the transaction currency (in thousands):
Functional
Currency Transaction Currency
Net Exposed
Long (Short)
Currency
Position
FX Gain (Loss)
From 10%
Appreciation of
Functional
Currency
FX Gain (Loss)
From 10%
Depreciation of
Functional
Currency
U.S. dollar Chinese yuan renminbi $ 88,959 $ (8,087) $ 9,884
Japanese yen U.S. dollar (19,843) 1,804 (2,205)
Taiwanese dollar U.S. dollar 14,226 (1,293) 1,581
Canadian dollar U.S. dollar (13,159) 1,196 (1,462)
Mexican peso U.S. dollar (7,053) 641 (784)
U.S. dollar Swiss franc 787 (72) 87
U.S. dollar Swedish krona 712 (65) 79
U.S. dollar Euro (616) 56 (68)
Euro British pound sterling 21,587 (1,962) 2,399
Euro Utd. Arab Emir. Dirham 1,035 (94) 115
Euro Norwegian kroner (909) 83 (101)
Euro Swiss franc 503 (46) 56
$ 86,229 $ (7,839) $ 9,581
Long currency positions represent net assets being held in the transaction currency while short
currency positions represent net liabilities being held in the transaction currency.
The Company’s principal manufacturing operations are located in China, with much of its component
and raw material costs transacted in CNY. However, the functional currency of its Chinese operating
subsidiary is the U.S. dollar as its sales and trade receivables are transacted in U.S. dollars. To hedge
against any potential significant appreciation of the CNY, the Company transferred a portion of its cash
investments to CNY accounts. At March 31, 2008, net assets held in CNY totaled $89.0 million. The
Company continues to evaluate the level of net assets held in CNY relative to component and raw material
purchases and interest rates on cash equivalents.