THQ 2010 Annual Report Download - page 48

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40
For those entities that have already adopted FAS 160, the amendments are effective at the beginning of the
first interim or annual reporting period ending on or after December 15, 2009, which will be our quarter
ending March 31, 2010. The amendments should be applied retrospectively to the first period that an entity
adopted FAS 160. Our adoption of this pronouncement did not have a material impact on our results of
operations, financial position or cash flows.
In January 2010, the FASB issued ASU 2010-06, “Fair Value Measurements and Disclosures (Topic 820):
Improving Disclosures about Fair Value Measurements” (“ASU 2010-06”). ASU 2010-06 amends ASC 820
and clarifies and provides additional disclosure requirements related to recurring and non-recurring fair value
measurements and employers’ disclosures about postretirement benefit plan assets. ASU 2010-06 is
effective for interim and annual reporting periods beginning after December 15, 2009, which was our quarter
ending March 31, 2010. Our adoption of this pronouncement did not have a material impact on our results of
operations, financial position or cash flows. Disclosures about purchases, sales, issuances, and settlements
in the roll forward activity in Level 3 fair value measurements are effective for fiscal years beginning after
December 15, 2010, and for interim periods within those fiscal years, which will be our quarter ending
June 30, 2011. The adoption is not expected to have a material impact on our results of operations, financial
position or cash flows.
Item 7A . Quanti tative and Qualitati ve Disclos ures About Market Risk
Market Ris k
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. We do
not enter into derivatives or other financial instruments for trading or speculative purposes.
Interest Rate Risk
We have interest rate risk primarily related to our investment portfolio. At March 31, 2010, our $188.4 million
of cash and cash equivalents were comprised of cash and time deposits, money market funds, negotiable
certificates of deposit, corporate securities, and municipal securities; $51.2 million of our cash equivalents are
classified as trading securities (specifically the negotiable certificates of deposit, corporate securities, and
municipal securities). At March 31, 2010, our $82.9 million of short-term investments included $17.2 million of
municipal securities, $64.4 million of corporate securities, and $1.3 million of negotiable certificates of
deposit; our long-term investments of $1.9 million consisted entirely of municipal securities. Our March 31,
2010 short-term and long-term investments were classified as available-for-sale. Additionally, we had
$21.0 million in trading auction rate securities classified as short-term investments, pledged, at March 31,
2010. We manage our interest rate risk by maintaining an investment portfolio generally consisting of debt
instruments of high credit quality and relatively short maturities. However, because short-term investments
mature relatively quickly and are generally reinvested at the then current market rates, interest income on a
portfolio consisting of cash equivalents and short-term investments is more subject to market fluctuations
than a portfolio of longer term investments. The value of these investments may fluctuate with changes in
interest rates, however, the contractual terms of the investments do not permit the issuer to call, prepay or
otherwise settle the investments at prices less than the stated par value.
We had no outstanding letters of credit at March 31, 2010.
Foreign Currency Exchange Rate Ri sk
We transact business in many different foreign currencies and are exposed to financial market risk resulting
from fluctuations in foreign currency exchange rates, particularly the GBP and the Euro, which may result in a
gain or loss of earnings to us. Our international business is subject to risks typical of an international
business, including, but not limited to, foreign currency exchange rate volatility. Accordingly, our future results
could be materially and adversely affected by changes in foreign currency exchange rates. Throughout the
year, we frequently monitor the volatility of the GBP and the Euro (and all other applicable currencies).