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gains and losses recognized on the underlying foreign-currency-denominated monetary asset or liability, in which
case our results will be impacted. As of March 31, 2013, we had foreign currency forward contracts to purchase
and sell approximately $306 million in foreign currencies. Of this amount, $213 million represented contracts to
sell foreign currencies in exchange for U.S. dollars, $87 million to purchase foreign currency in exchange for
U.S. dollars, and $6 million to sell foreign currency in exchange for British pound sterling. As of March 31,
2012, we had foreign currency forward contracts to purchase and sell approximately $242 million in foreign
currencies. Of this amount, $197 million represented contracts to sell foreign currencies in exchange for U.S.
dollars, $37 million to purchase foreign currency in exchange for U.S. dollars and $8 million to sell foreign
currency in exchange for British pound sterling. The fair value of our foreign currency forward contracts was
immaterial as of March 31, 2013 and 2012.
We believe the counterparties to these foreign currency forward and option contracts are creditworthy
multinational commercial banks. While we believe the risk of counterparty nonperformance is not material, a
sustained decline in the financial stability of financial institutions as a result of the disruption in the financial
markets could affect our ability to secure credit-worthy counterparties for our foreign currency hedging
programs.
Notwithstanding our efforts to mitigate some foreign currency exchange rate risks, there can be no assurance that
our hedging activities will adequately protect us against the risks associated with foreign currency fluctuations.
As of March 31, 2013, a hypothetical adverse foreign currency exchange rate movement of 10 percent or
20 percent would have resulted in potential declines in the fair value of the premiums on our foreign currency
option contracts used in cash flow hedging of $5 million and $6 million, respectively. As of March 31, 2013, a
hypothetical adverse foreign currency exchange rate movement of 10 percent or 20 percent would have resulted
in potential losses on our foreign currency forward contracts used in balance sheet hedging of $30 million and
$61 million, respectively. This sensitivity analysis assumes an adverse shift of all foreign currency exchange
rates; however, all foreign currency exchange rates do not always move in such manner and actual results may
differ materially.
Interest Rate Risk
Our exposure to market risk for changes in interest rates relates primarily to our short-term investment portfolio.
We manage our interest rate risk by maintaining an investment portfolio generally consisting of debt instruments
of high credit quality and relatively short maturities. However, because short-term investments mature relatively
quickly and are required to be reinvested at the then-current market rates, interest income on a portfolio
consisting of short-term investments is more subject to market fluctuations than a portfolio of longer term
investments. Additionally, the contractual terms of the investments do not permit the issuer to call, prepay or
otherwise settle the investments at prices less than the stated par value. Our investments are held for purposes
other than trading. Also, we do not use derivative financial instruments in our short-term investment portfolio.
As of March 31, 2013 and 2012, our short-term investments were classified as available-for-sale securities and,
consequently, were recorded at fair market value with unrealized gains or losses resulting from changes in fair
value reported as a separate component of accumulated other comprehensive income, net of tax, in stockholders'
equity. Our portfolio of short-term investments consisted of the following investment categories, summarized by
fair value as of March 31, 2013 and 2012 (in millions):
As of March 31,
2013
2012
Corporate bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$178
$150
U.S. Treasury securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
85
166
U.S. agency securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
76
116
Commercial paper . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
49
5
Total short-term investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$388
$437
58