Plantronics 2006 Annual Report Download - page 83

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part ii
Fiscal Year
Each of the Company’s fiscal years ends on the Saturday closest to the last day of March. Its fiscal year
2006 ended on April 1, 2006. Its fiscal year 2005 ended on April 2, 2005, and its fiscal year 2004 ended
on April 3, 2004. For purposes of presentation, the Company has indicated its accounting year ended on
March 31. Results of operations for the fiscal years 2005 and 2006 included 52 weeks while its fiscal year
2004 included 53 weeks.
Financial Instruments
The carrying values of the Company’s financial instruments, including cash, cash equivalents, marketable
securities, accounts receivable, line of credit, accounts payable and accrued liabilities, approximate fair
value due to their short maturities.
Cash and Cash Equivalents
All highly liquid investments with original or remaining maturities of three months or less at the date of
purchase are classified as cash equivalents.
Short Term Investments
Plantronics considers investments maturing between three and twelve months from the date of purchase
as short term investments. Also included in short term investments are auction rate securities whose reset
dates may be less than three months; however, the underlying security’s contractual maturity is greater
than three months. Management determines the appropriate classification of its investments at the time
of purchase and reevaluates the available-for-sale designations as of each balance sheet date. All
investments are held in the Plantronics’ name at a limited number of major financial institutions. At
March 31, 2005 and 2006, all of the Company’s investments were classified as available-for-sale and are
carried at fair value based upon quoted market prices at the end of the reporting period. Resulting
unrealized gains and losses are recorded as a separate component of accumulated other comprehensive
income (loss) in stockholder’s equity. If these investments are sold at a loss or are considered to have a
decline in value, other than temporary, a charge to operations is recorded. (See Note 8).
Derivatives
The Company accounts for its derivative instruments as either assets or liabilities and carries them at fair
value. The accounting for changes in the fair value of a derivative depends on the intended use of the
derivative and the resulting designation. For derivative instruments designated as a fair value hedge, the
gain or loss is recognized in earnings in the period of change together with the offsetting loss or gain on
the hedged item attributed to the risk being hedged. For a derivative instrument designated as a cash flow
hedge, the effective portion of the derivative’s gain or loss is initially reported as a component of
accumulated other comprehensive income (loss) in stockholders’ equity and subsequently reclassified into
earnings when the hedged exposure affects earnings. The ineffective portion of the gain or loss is reported
in earnings immediately. For derivative instruments that are not designated as accounting hedges, under
SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, changes in fair value are
recognized in earnings in the period of change. The Company does not hold or issue derivative financial
instruments for speculative trading purposes. Plantronics enters into derivatives only with counterparties
that are among the largest U.S. banks, ranked by assets, in order to minimize its credit risk. (See
Note 11).
AR 2006 ⯗77