Electronic Arts 2014 Annual Report Download - page 126

OFF-BALANCE SHEET COMMITMENTS
Lease Commitments
As of March 31, 2014, we leased certain facilities, furniture and equipment under non-cancelable operating lease
agreements. We were required to pay property taxes, insurance and normal maintenance costs for certain of these
facilities and any increases over the base year of these expenses on the remainder of our facilities.
Director Indemnity Agreements
We entered into indemnification agreements with each of the members of our Board of Directors at the time they
joined the Board to indemnify them to the extent permitted by law against any and all liabilities, costs, expenses,
amounts paid in settlement and damages incurred by the directors as a result of any lawsuit, or any judicial,
administrative or investigative proceeding in which the directors are sued or charged as a result of their service as
members of our Board of Directors.
INFLATION
We believe the impact of inflation on our results of operations has not been significant in any of the past three
fiscal years.
Item 7A: Quantitative and Qualitative Disclosures About Market Risk
MARKET RISK
We are exposed to various market risks, including changes in foreign currency exchange rates, interest rates and
market prices, which have experienced significant volatility in light of the global economic downturn. 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. Foreign currency option and forward contracts are used to hedge anticipated
exposures or mitigate some existing exposures subject to foreign exchange risk as discussed below. While we do
not hedge our short-term investment portfolio, we protect our short-term investment portfolio against different
market risks, including interest rate risk as discussed below. Our cash and cash equivalents portfolio consists of
highly liquid investments with insignificant interest rate risk and original or remaining maturities of three months
or less at the time of purchase. We do not enter into derivatives or other financial instruments for trading or
speculative purposes and do not hedge our market price risk relating to marketable equity securities, if any.
Foreign Currency Exchange Rate Risk
Cash Flow Hedging Activities. From time to time, we hedge a portion of our foreign currency risk related to
forecasted foreign-currency-denominated sales and expense transactions by purchasing foreign currency forward
and option contracts that generally have maturities of 15 months or less. These transactions are designated and
qualify as cash flow hedges. The derivative assets or liabilities associated with our hedging activities are
recorded at fair value in other current assets or accrued and other current liabilities on our Consolidated Balance
Sheets. The effective portion of gains or losses resulting from changes in the fair value of these hedges is initially
reported, net of tax, as a component of accumulated other comprehensive income in stockholders’ equity. The
gross amount of the effective portion of gains or losses resulting from changes in the fair value of these hedges is
subsequently reclassified into net revenue or research and development expenses, as appropriate, in the period
when the forecasted transaction is recognized in our Consolidated Statements of Operations. In the event that the
gains or losses in accumulated other comprehensive income are deemed to be ineffective, the ineffective portion
of gains or losses resulting from changes in fair value, if any, is reclassified to interest and other income
(expense), net, in our Consolidated Statements of Operations. In the event that the underlying forecasted
transactions do not occur, or it becomes remote that they will occur, within the defined hedge period, the gains or
losses on the related cash flow hedges are reclassified from accumulated other comprehensive income to interest
and other income (expense), net, in our Consolidated Statements of Operations. Our hedging programs are
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