Plantronics 2001 Annual Report Download - page 16

Fair Value of Financial Instruments. The carrying value of our financial instruments, including
cash, cash equivalents, marketable securities, accounts receivable, accrued expenses and
liabilities, approximate fair value due to their short maturities.
Income Taxes. We account for income taxes under the liability method, which recognizes
deferred tax assets and liabilities for the expected future tax consequences of temporary
differences between the tax basis of assets and liabilities and their financial statement
reported amounts. We account for tax credits as a reduction of tax expense in the year in
which the credits reduce taxes payable.
Foreign Operations and Currency Translation. We have foreign assembly and manufacturing
operations in Mexico, light assembly, research and development, sales and marketing
operations in the United Kingdom, an international finance, customer service and logistics
headquarters in the Netherlands, an international procurement office in Taiwan, and sales
offices in Canada, Asia, Europe, Australia and South America. For fiscal 1999, 2000 and the
first three quarters of 2001, the functional currency of all foreign operations was the U.S.
dollar. Accordingly, gains or losses arising from the translation of foreign currency statements
and transactions were included in determining consolidated results of operations.
Effective January 1, 2001, the functional currency for foreign sales and research and
development operations was changed from the U.S. dollar to the respective operations’ local
currency. The change was driven by increased investment in foreign operations through
headcount, research and development and sales and marketing programs. As a result of this
change, we recorded a $0.3 million net decrease in currency translation adjustments as a
component of other comprehensive loss. The functional currencies of all revenue and related
cost of goods sold derived from international operations are still denominated in U.S. dollars.
Aggregate exchange losses for fiscal 1999, 2000 and 2001 were $0.2 million, $0.8 million and
$2.2 million, respectively.
Earnings Per Share. Basic Earnings Per Share (“EPS”) is computed by dividing net income
available to common stockholders (numerator computed as net income before and after
extraordinary item) by the weighted average number of common shares outstanding (denom-
inator) during the period. Basic EPS excludes the dilutive effect of stock options. Diluted
EPS gives effect to all dilutive potential common shares outstanding during a period. In
computing diluted EPS, the average stock price for the period is used in determining the
number of shares assumed to be purchased from exercise of stock options.
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