Symantec 2007 Annual Report Download - page 62

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simplifies the accounting for certain derivatives embedded in other financial instruments by allowing them to be
accounted for as a whole if the holder elects to account for the entire instrument on a fair value basis. SFAS No. 155
also clarifies and amends certain other provisions of SFAS No. 133 and SFAS No. 140. SFAS No. 155 is effective for
all financial instruments acquired, issued, or subject to a re-measurement event occurring in fiscal years beginning
after September 15, 2006. Earlier adoption is permitted, provided the company has not yet issued financial
statements, including for interim periods, for that fiscal year. We do not expect the adoption of SFAS No. 155 to
have a material impact on our consolidated financial statements.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
We are exposed to various market risks related to fluctuations in interest rates, foreign currency exchange rates,
and equity prices. We may use derivative financial instruments to mitigate certain risks in accordance with our
investment and foreign exchange policies. We do not use derivatives or other financial instruments for trading or
speculative purposes.
Interest Rate Risk
Our exposure to interest rate risk relates primarily to our short-term investment portfolio and the potential
losses arising from changes in interest rates. Our investment objective is to achieve the maximum return compatible
with capital preservation and liquidity requirements. Our strategy is to invest our cash in a manner that preserves
capital, maintains sufficient liquidity to meet the cash requirements of the company, maximizes yields consistent
with approved credit risk, and limits inappropriate concentrations of investment by sector, credit, or issuer. We
classify our cash equivalents and short-term investments in accordance with SFAS No. 115, Accounting for Certain
Investments in Debt and Equity Securities. We consider investments in instruments purchased with an original
maturity of 90 days or less to be cash equivalents. We classify our short-term investments as available-for-sale, and
short-term investments consist of marketable debt or equity securities with original maturities in excess of 90 days.
Our cash equivalents and short-term investment portfolios consist primarily of money market funds, commercial
paper, corporate debt securities, asset-backed debt securities, and U.S. government and government-sponsored debt
securities. Our short-term investments do not include equity investments in privately held companies. Our short-
term investments are reported at fair value with unrealized gains and losses, net of tax, included in Accumulated
other comprehensive income within Stockholders’ equity in the Consolidated Balance Sheets. The amortization of
premiums and discounts on the investments, realized gains and losses, and declines in value judged to be
other-than-temporary on available-for-sale securities are included in Other income (expense), net in the Consol-
idated Statements of Income. We use the specific identification method to determine cost in calculating realized
gains and losses upon sale of short-term investments.
The following table presents the fair value and hypothetical changes in fair values on short-term investments
sensitive to changes in interest rates (in millions):
150 bps 100 bps 50 bps
Fair Value
As of
March 31, (25 bps) (75 bps)
Value of Securities Given an
Interest Rate Increase of
X Basis Points (bps)
Value of Securities
Given an Interest
Rate Decrease of X
Basis Points (bps)
March 31, 2007 ........................ $1,770 $1,772 $1,775 $1,778 $1,779 $1,782
March 31, 2006 ........................ $1,506 $1,510 $1,513 $1,517 $1,519 $1,523
The modeling technique used above measures the change in fair market value arising from selected potential
changes in interest rates. Market changes reflect immediate hypothetical parallel shifts in the yield curve of plus
150 bps, plus 100 bps, plus 50 bps, minus 25 bps, and minus 75 bps.
Foreign Currency Exchange Rate Risk
We conduct business in 38 currencies through our worldwide operations and, as such, we are exposed to
foreign currency exposure risk. Foreign currency risks are associated with our cash and cash equivalents,
investments, receivables, and payables denominated in foreign currencies. Fluctuations in exchange rates will
result in foreign exchange gains and losses on these foreign currency assets and liabilities and are included in Other
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