Western Digital 2004 Annual Report Download - page 48

Download and view the complete annual report

Please find page 48 of the 2004 Western Digital annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 74

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74

WESTERN DIGITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
Fair Value of Financial Instruments
The carrying amount of cash and cash equivalents approximates fair value for all periods presented because of the
short-term maturity of these Ñnancial instruments. The carrying amounts of all other Ñnancial instruments in the
consolidated balance sheets approximate fair values.
Other Comprehensive Income
Other comprehensive income refers to revenue, expenses, gains and losses that are recorded as an element of
shareholders' equity but are excluded from net income. The Company's other comprehensive income is comprised of
unrealized gains and losses on foreign currency contracts and marketable securities categorized as ""available for sale''
under Statement of Financial Accounting Standards No. 115 ""Accounting for Certain Investments in Debt and Equity
Securities.''
Foreign Exchange Contracts
Although the majority of the Company's transactions are in U.S. Dollars, some transactions are based in various
foreign currencies. The Company purchases short-term, forward exchange contracts to hedge the impact of foreign
currency Öuctuations on certain underlying assets, liabilities and commitments for operating expenses and product costs
denominated in foreign currencies. The contracts have maturity dates that do not exceed six months. The Company does
not purchase short-term forward exchange contracts for trading purposes.
The Company applies the provisions of Statement of Financial Accounting Standards No. 133, ""Accounting for
Derivative Instruments and Hedging Activities'' (""SFAS 133''), as amended by Statement of Financial Accounting
Standards No. 138, ""Accounting for Certain Derivative Instruments and Certain Hedging Activities, an Amendment of
FASB Statement No. 133'' and Statement of Financial Accounting Standards No. 149 ""Amendment of Statement 133
on Derivative Instruments and Hedging Activities.'' SFAS 133, as amended, establishes accounting and reporting
standards for derivative instruments embedded in other contracts and for hedging activities. The Company had
outstanding forward exchange contracts with commercial banks for the Thai Baht, British Pound Sterling and Euro with
values of $173.7 million and $35.8 million at July 2, 2004 and June 27, 2003, respectively. Changes in fair value on
these contracts were not material to the consolidated Ñnancial statements for all years presented.
Use of Estimates
Company management has made estimates and assumptions relating to the reporting of certain assets and liabilities
in conformity with generally accepted accounting principles. These estimates and assumptions have been applied using
methodologies, which are consistent throughout the periods presented. However, actual results could diÅer from these
estimates.
ReclassiÑcations
Certain prior years' amounts have been reclassiÑed to conform to the current year presentation.
43