THQ 2009 Annual Report Download - page 57

(6) We have omitted unrecognized tax benefits from this table due to the inherent uncertainty
regarding the timing and amount of certain payments related to these unrecognized tax benefits.
The underlying positions have not been fully developed under audit to quantify at this time. As of
March 31, 2009 we had $10.9 million of unrecognized tax benefits. See ‘‘Note 14—Income Taxes’’
in the notes to the consolidated financial statements.
Other potential future expenditures relate to the following:
Manufacturer Indemnification. We must indemnify the platform manufacturers (Microsoft, Nintendo,
Sony) of our games with respect to all loss, liability and expenses resulting from any claim against such
manufacturer involving the development, marketing, sale or use of our games, including any claims for
copyright or trademark infringement brought against such manufacturer. As a result, we bear a risk that
the properties upon which the titles of our games are based, or that the information and technology
licensed from others and incorporated into the products, may infringe the rights of third parties. Our
agreements with our third-party software developers and property licensors typically provide
indemnification rights for us with respect to certain matters. However, if a manufacturer brings a claim
against us for indemnification, the developers or licensors may not have sufficient resources to, in turn,
indemnify us.
Indemnity Agreements. We have entered into indemnification agreements with the members of our Board
of Directors, our Chief Executive Officer and our Chief Financial Officer, to provide a contractual right of
indemnification to such persons to the extent permitted by law against any and all liabilities, costs,
expenses, amounts paid in settlement and damages incurred by the any such person as a result of any
lawsuit, or any judicial, administrative or investigative proceeding in which such person is sued as a result
of their service as members of our Board of Directors, Chief Executive Officer or as Chief Financial
Officer. The indemnification agreements provide specific procedures and time frames with respect to
requests for indemnification and clarify the benefits and remedies available to the indemnities in the event
of an indemnification request.
Litigation. For information related to legal proceedings that may result in future expenditures to the
Company, see ‘‘Item 3—Legal Proceedings.’’
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Market Risk
We are exposed to certain market risks arising from transactions in the normal course of business,
principally risks associated with interest rate and foreign currency fluctuations. Market risk is the potential
loss arising from changes in market rates and market prices. We employ established policies and practices
to manage these risks. We use foreign exchange option and forward contracts to hedge anticipated
exposures or mitigate some existing exposures subject to foreign currency exchange rate risk as discussed
below.
Interest Rate Risk
We have interest rate risk primarily related to our investment portfolio. A substantial portion of our
portfolio is in short-term investments made up of primarily municipal securities and long-term investments
made up of auction rate securities (‘‘ARS’’). The value of these investments may fluctuate with changes in
interest rates. However, we believe our interest rate risk is insignificant due to the short-term nature of the
municipal securities and the fact that the interest rates on our ARS are either reset to short-term interest
rates in the auction process or, in the event of a failed auction, are reset to the failure rates as specified in
the underlying agreements which are typically equal to or greater than short-term interest rates at the time
of reset. Although there has been recent uncertainty in the credit markets, all of the securities are
investment grade securities, and we have no reason to believe that any of the underlying issuers of our
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