XM Radio 2000 Annual Report Download - page 28

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RADiO TO THE POWER OF X
XM SATELLiTE RADiO 2000 Annual Report
In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities. In
June 2000, the FASB issued SFAS No. 138, Accounting for Certain Derivative Instruments and Certain Hedging
Activity, An Amendment of SFAS 133. SFAS No. 133 and SFAS No. 138 require that all derivative instruments be
recorded on the balance sheet at their respective fair values. SFAS No. 133 and SFAS No. 138 are effective for
all fiscal quarters of all fiscal years beginning after 2000; we adopted SFAS No. 133 and SFAS No. 138 on
January 1, 2001. We have reviewed our contracts and determined that we have no derivative instruments and
do not engage in hedging activities.
Quantitative and Qualitative Disclosures About Market Risk
As of December 31, 2000, we do not have any derivative financial instruments and do not intend to use derivatives.
We invest our cash in short-term commercial paper and investment-grade corporate and government obligations
and money market funds. Our long-term debt includes a fixed interest rate and the fair market value of the debt
is sensitive to changes to interest rates. We run the risk that market rates will decline and the required payments
will exceed those based on current market rates. Under our current policies, we do not use interest rate derivative
instruments to manage our exposure to interest rate fluctuations. Additionally, we believe that our exposure to
interest rate risk is not material to our results of operations.
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