Qualcomm 2012 Annual Report Download - page 48

not recover in value within a reasonable period.
Foreign Exchange Risk. We manage our exposure to foreign exchange market risks, when deemed appropriate, through the use of
derivative financial instruments, including foreign currency forward and option contracts with financial counterparties. We utilize such
derivative financial instruments for hedging or risk management purposes rather than for speculation purposes. Counterparties to our derivative
contracts are all major institutions. In the event of the financial insolvency or distress of a counterparty to our derivative financial instruments,
we may be unable to settle transactions if the counterparty does not provide us with sufficient collateral to secure its net settlement obligations to
us, which could have a negative impact on our results.
At September 30, 2012 , we had a net asset of $1 million related to foreign currency option contracts that were designated as hedges of
foreign currency risk on royalties earned from certain licensees on their sales of CDMA-based devices. If our forecasted royalty revenues were
to decline by 20% and foreign exchange rates were to change unfavorably by 20% in our hedged foreign currency, we would not incur a loss.
See “Notes to Consolidated Financial Statements, Note 1. The Company and Its Significant Accounting Policies”
for a description of our foreign
currency accounting policies.
At September 30, 2012 , we had a net asset of $4 million related to foreign currency forward contracts that were designated as hedges of
foreign currency risk on intercompany payments of operating expenditures relating to a wholly-owned foreign subsidiary. If our forecasted
operating expenditures were to decline by 20% and foreign exchange rates were to change unfavorably by 20% in each of our hedged foreign
currencies, we would not incur a loss.
At September 30, 2012 , we had a net liability that was negligible related to foreign currency forwards, futures, options and swaps that were
not designated as hedging instruments related to our marketable securities portfolios classified as trading. If the foreign exchange rates relevant
to these contracts were to change unfavorably by 10% and we do not have an offset foreign currency exposure relating to debt instruments held
in our marketable securities portfolios classified as trading, we would incur a loss of $2 million.
At September 30, 2012 , we had floating-rate bank loans and debentures in the aggregate of $1.1 billion, which are payable in full in Indian
rupees in December 2012 and June 2017, respectively. The loans and debentures are payable in the functional currency of our consolidated
subsidiaries that are party to the loans and debentures; however, we are subject to foreign currency translation risk, which may impact our
liability for principal repayment and interest expense that we will record in the future. If the foreign currency exchange rate were to change
unfavorably by 20%, we would incur additional principal of $262 million and interest cost of $12 million through the remainder of the
contractual terms of the loans and debentures.
Financial instruments held by consolidated subsidiaries that are not denominated in the functional currency of those entities are subject to the
effects of currency fluctuations and may affect reported earnings. As a global concern, we face exposure to adverse movements in foreign
currency exchange rates. We may hedge currency exposures associated with certain assets and liabilities denominated in nonfunctional
currencies and certain anticipated nonfunctional currency transactions. As a result, we could experience unanticipated gains or losses on
anticipated foreign currency cash flows, as well as economic loss with respect to the recoverability of investments. While we may hedge certain
transactions with non-
United States customers, declines in currency values in certain regions may, if not reversed, adversely affect future product
sales because our products may become more expensive to purchase in the countries of the affected currencies.
Our analysis methods used to assess and mitigate the risks discussed above should not be considered projections of future risks.
Item 8. Financial Statements and Supplementary Data
Our consolidated financial statements at September 30, 2012 and September 25, 2011 and the Report of PricewaterhouseCoopers LLP,
Independent Registered Public Accounting Firm, are included in this Annual Report on Form 10-K on pages F-1 through F-34 .
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer,
we conducted an evaluation of our disclosure controls and procedures, as such terms are defined under Rule 13a-15(e) promulgated under the
Securities Exchange Act of 1934, as amended (the Exchange Act). Based on this evaluation, our principal executive officer and our principal
financial officer concluded that our disclosure controls and
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