THQ 2006 Annual Report Download - page 68

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60
treasury stock method and represent incremental shares issuable upon exercise of our outstanding options
and warrants and, if applicable in the period, conversion of our convertible debt. However, potential
common shares are not included in the denominator of the diluted earnings per share calculation when
inclusion of such shares would be anti-dilutive, such as in a period in which a net loss is recorded.
Recently Issued Accounting Pronouncements. In December 2004, the Financial Accounting Standards
Board (“FASB”) issued SFAS No. 123R, “Share-Based Payment” (“SFAS No. 123R”), a revision of
SFAS No. 123. SFAS No. 123R requires companies to, among other things, measure all employee stock-
based compensation awards using a fair value method and record the expense in their consolidated
financial statements. The provisionsof SFAS No. 123R, SEC SAB No. 107, “Share-Based Payment” and
other related clarifying pronouncements, are effective no later than the beginning of the next fiscal year
that begins after June15, 2005. We will adopt the new requirements in our fiscal year beginning April 1,
2006 using the modified prospective transition method, wherein prior period amounts will not be restated.
In addition to the recognition of expense in the financial statements, under SFAS No. 123R, any excess tax
benefits received upon exercise of options will be presented as a financing activity inflow rather than as an
adjustment of operating activity as currently presented. Based on our current analysis and information,
management has determined the adoption of SFAS No. 123R will have a material impact on our
consolidated results of operations and earnings per share. We expect the adoption of SFAS No. 123R will
result in amounts that are similar to our current pro forma disclosures under SFAS No. 123.
In November 2005, the FASB issued Staff Position No. FAS 115-1, “The Meaning of Other-Than-
Temporary Impairment and Its Application to Certain Investments” (“FSP No. 115-1”). FSP No. 115-1
provides accounting guidance for identifying and recognizing other-than-temporary impairments of debt
and equity securities, as well as cost method investments in addition to disclosure requirements.
FSP No. 115-1 is effective for reporting periods beginning after December 15, 2005, although earlier
application is permitted. We adopted FSP No. 115-1 in our fiscal fourth quarter beginning January 1, 2006,
and this adoption did not have a material impact on our consolidated results of operations and earnings
per share.
2. Cash, Cash Equivalents and Short-Term Investments
Cash, cash equivalents and short-term investments at March 31, 2006 and 2005 consist of the following (in
thousands):
March 31,
2006 2005
Cash and cash equivalents................................. $91,517 $98,175
Short-term investments:
Available-for-sale securities:
Corporate notes and bonds........................... 19,000 23,200
Municipal securities.................................. 261,120 186,178
280,120 209,378
Held-to-maturity securities:
Municipal securities.................................. —23,620
— 23,620
Total short-term investments............................ 280,120232,998
Cash, cash equivalents, short-term investments and financial
instruments........................................... $371,637 $331,173