Facebook 2014 Annual Report Download - page 55

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We are exposed to market risks, including changes to foreign currency exchange rates, interest rates, and inflation.
Foreign Currency Exchange Risk
We have foreign currency risks related to our revenue and operating expenses denominated in currencies other than the U.S. dollar, primarily the
Euro. In general, we are a net receiver of currencies other than the U.S. dollar. Accordingly, changes in exchange rates, and in particular a strengthening
of the U.S. dollar, will negatively affect our revenue and other operating results as expressed in U.S. dollars.
We have experienced and will continue to experience fluctuations in our net income as a result of transaction gains or losses related to revaluing
certain current asset and current liability balances that are denominated in currencies other than the functional currency of the entities in which they are
recorded. At this time we have not entered into, but in the future we may enter into, derivatives or other financial instruments in an attempt to hedge our
foreign currency exchange risk. It is difficult to predict the effect hedging activities would have on our results of operations. We recognized foreign
currency losses of $87 million , $14 million , and $9 million in 2014 , 2013 , and 2012 , respectively.
Interest Rate Sensitivity
Our exposure to changes in interest rates relates primarily to interest earned and market value on our cash and cash equivalents and marketable
securities.
Our cash and cash equivalents and marketable securities consist of cash, certificates of deposit, time deposits, money market funds,
U.S.
government securities, U.S. government agency securities, and corporate debt securities
. Our investment policy and strategy are focused on preservation
of capital and supporting our liquidity requirements. Changes in U.S. interest rates affect the interest earned on our cash and cash equivalents and
marketable securities and the market value of those securities. A hypothetical 100 basis point increase in interest rates would result in a decrease of
approximately $63 million and $73 million in the market value of our available-for-sale debt securities as of December 31, 2014 and
December 31,
2013 , respectively. Any realized gains or losses resulting from such interest rate changes would only occur if we sold the investments prior to maturity.
52
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk