Salesforce.com 2008 Annual Report Download - page 69

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Table of Contents
salesforce.com, inc.
Notes to Consolidated Financial Statements—(Continued)
Derivative Financial Instruments
The Company has operated a hedging program for the past three years to manage its short-term exposure to fluctuations in foreign currency exchange
rates, which exist as part of ongoing business operations. The Company enters into foreign currency contracts with financial institutions to reduce the risk that
its cash flows and earnings will be adversely affected by foreign currency exchange rate fluctuations. The Company uses forward contracts to hedge a
majority of transaction exposures denominated in Euros, Swiss francs, Australian dollars, Singapore dollars, Japanese yen and British pounds. The Company's
program is not designated for trading or speculative purposes. Prior to October 31, 2008 it had been the Company's practice to settle foreign currency
contracts prior to each quarter end because the maturities of the foreign currency contracts were less than 3 months. The Company continues its practice of
entering into foreign currency contracts with maturities less than three months. As of January 31, 2009 the contracts that were not settled are recorded at fair
value on the consolidated balance sheet.
The Company's foreign currency forward contracts, which are not designated as hedging instruments under FASB Statement No. 133, Accounting for
Derivative Instruments and Hedging Activities, or SFAS 133, are used to reduce the exchange rate risk associated primarily with intercompany receivables
and payables. Forward contracts are marked-to-market at the end of each reporting period with gains and losses recognized as other income (expense) to
offset the gains or losses resulting from the settlement of the underlying foreign currency denominated receivables and payables. While the contract or
notional amount is often used to express the volume of foreign exchange contracts, the amounts potentially subject to credit risk are generally limited to the
amounts, if any, by which the counterparties' obligations under the agreements exceed the obligations of the Company to the counterparties.
Details on outstanding forward contracts related primarily to intercompany receivables and payables are presented below (in thousands):
January 31,
2009
January 31,
2008
Notional amount of foreign currency forward contracts $ 158,704 $ —
Fair value of foreign currency forward contracts (1,004) —
Interest, net
The components of Interest, net are presented below (in thousands):
Fiscal Year Ended January 31,
(in thousands) 2009 2008 2007
Interest income $ 24,188 $ 24,666 $ 14,779
Realized gains 1,048 — 5
Realized losses (2,569) (173) —
Total interest, net $ 22,667 $ 24,493 $ 14,784
Fixed Assets
Fixed assets are stated at cost. Depreciation is calculated on a straight-line basis over the estimated useful lives of those assets as follows:
Computers, equipment, and software 3 to 5 years
Furniture and fixtures 5 to 7 years
Leasehold improvements Shorter of the estimated useful life or the lease term
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