Electronic Arts 2004 Annual Report Download - page 82

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(2) FINANCIAL INSTRUMENTS
(a) Fair Value of Financial Instruments
Cash, cash equivalents, short-term investments, receivables, accounts payable and accrued liabilities are
valued at their carrying amounts as it approximates their fair value due to the short maturity of these
instruments.
Investments classiÑed as marketable equity securities are valued at their fair value based on quoted market
prices.
(b) Cash, Cash Equivalents and Short-term Investments
(In thousands) As of March 31,
2004 2003
Cash and cash equivalents:
Cash ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 158,605 $ 317,427
Money market funds ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,134,024 616,393
Municipal securitiesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 274,379 Ì
U.S. agency bonds ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 577,441 Ì
Commercial paper ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5,436 16,175
Cash and cash equivalents ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,149,885 949,995
Short-term investments:
Available-for-sale
U.S. agency bonds ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 264,461 637,623
Short-term investments ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 264,461 637,623
Cash, cash equivalents and short-term investments ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $2,414,346 $1,587,618
(c) Marketable Equity Securities
We have accounted for investments in marketable equity securities as ""available-for-sale'' and have stated
applicable investments at fair value, with any net unrealized gain (loss) reported as a separate component of
accumulated other comprehensive income (loss) in stockholders' equity. Marketable equity securities had a
fair market value of $1.2 million and $1.1 million as of March 31, 2004 and 2003, respectively. As of
March 31, 2004, marketable equity securities included gross unrealized gains of $0.5 million. As of
March 31, 2003, gross unrealized losses included in marketable securities were not material. The sale of
marketable equity securities resulted in realized gains of $0.3 million and $2.1 million in Ñscal 2004 and Ñscal
2003, respectively. There were no sales of marketable equity securities in Ñscal 2002. In addition, during Ñscal
2004, we recorded an other-than-temporary impairment on marketable equity securities of $1.1 million.
(3) DERIVATIVE FINANCIAL INSTRUMENTS
We account for our derivative and hedging activities under SFAS No. 133, ""Accounting for Derivative
Instruments and Hedging Activities'', as amended. The assets or liabilities associated with our derivative
instruments and hedging activities are recorded at fair value in other current assets or liabilities, respectively,
on our Consolidated Balance Sheets. As discussed below, gains and losses resulting from changes in fair value
are accounted for depending on the use of the derivative and whether it is designated and qualiÑes for hedge
accounting.
We transact business in various foreign currencies and have signiÑcant international sales and purchase
transactions denominated in foreign currencies. As a result, we purchase currency option contracts as cash
Öow hedges to reduce, but not eliminate, the volatility of cash Öows primarily related to revenue generated by
our operational subsidiaries. In addition, we utilize foreign exchange forward contracts to mitigate foreign
67