Fair Value Measurements and Derivative Instruments

Fair Value Measurements

FASB guidance for fair value measurements clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, the guidance establishes a three-tier value hierarchy, which prioritizes the inputs used in measuring fair value as follows: (Level 1) observable inputs such as quoted prices in active markets; (Level 2) inputs other than the quoted prices in active markets that are observable either directly or indirectly; and (Level 3) unobservable inputs in which there is little or no market data, which require us to develop our own assumptions. This hierarchy requires us to use observable market data, when available, and to minimize the use of unobservable inputs when determining fair value. On a recurring basis, we measure certain financial assets and liabilities at fair value, including our marketable securities and foreign currency contracts.

Our cash equivalents and investment instruments are classified within Level 1 or Level 2 of the fair value hierarchy because they are valued using quoted market prices, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency. The types of instruments valued based on quoted market prices in active markets include money market securities. Such instruments are generally classified within Level 1 of the fair value hierarchy.

The types of instruments valued based on other observable inputs include U.S. government and agency securities, sovereign government obligations, investment-grade corporate bonds, mortgage-backed and asset-backed products, term deposits and state, municipal and provincial obligations. Such instruments are generally classified within Level 2 of the fair value hierarchy.

We execute our foreign currency contracts primarily in the retail market in an over-the-counter environment with a relatively high level of price transparency. The market participants usually are large multi-national and regional banks. Our foreign currency contracts valuation inputs are based on quoted prices and quoted pricing intervals from public data sources and do not involve management judgment. These contracts are typically classified within Level 2 of the fair value hierarchy. There is no transfer between Level 1, Level 2 and Level 3 in our fiscal years 2013 and 2012.

Fair value hierarchy of our cash equivalents, short-term investments and foreign currency contracts at fair value (in thousands):



			Fair Value Measurements at Reporting Date using
Description	Total Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant other Observable Inputs (Level 2)
As of November 30, 2013
Assets:
Money market funds	$	245,953	$	245,953	$	—
Corporate bonds and commercial papers	77,508		—		77,508
U.S. government and agency debt securities	6,013		—		6,013
Term deposits	536		—		536
Mortgage-backed securities	321		—		321
Foreign currency forward contracts	625		—		625
Liabilities:
Foreign currency forward contracts	$	547	$	—	$	547
As of November 30, 2012
Assets:
Money market funds	$	376,480	$	376,480	$	—
Corporate bonds and commercial papers	24,558		—		24,558
U.S. government and agency debt securities	9,645		—		9,645
Term deposits	595		—		595
Mortgage-backed securities	208		—		208
Foreign currency forward contracts	101		—		101
Liabilities:
Foreign currency forward contracts	$	130	$	—	$	130

Derivative Instruments

We conduct business in the Americas; Europe, the Middle East and Africa ("EMEA"); and Asia Pacific and Japan ("APJ"). As a result, our financial results could be affected by factors such as changes in foreign currency exchange rates or changes in economic conditions in foreign markets. The U.S. dollar is our major transaction currency; we also transact business in approximately 25 foreign currencies worldwide, of which the most significant to our operations in fiscal years 2013 and 2012 was the Euro, British pound, Australian dollar and Japanese yen. We enter into forward contracts with financial institutions to manage our currency exposure related to net assets and liabilities denominated in foreign currencies, and these forward contracts are generally settled monthly. Our forward contracts reduce, but do not eliminate, the impact of currency exchange rate movements. Gains and losses on forward contracts are included in Other Income (Expense) in our Consolidated Statements of Operations.

As of November 30, 2013, we had the following forward contracts outstanding (in thousands):



	Notional Value Local Currency	Notional Value USD		Fair Value Gain (Loss) USD
Forward contracts sold:
Australian dollar	4,800	$	4,368	120
British pound	8,700	14,238		(270		)
Canadian dollar	500	471		6
Euro	30,000	40,764		86
Japanese yen	465,000	4,540		263
Polish zloty	1,400	452		7
Swedish krona	—	—		(34		)
Swiss franc	1,000	1,103		(11		)
New Taiwan dollar	31,000	1,047		—
Forward contracts bought:
Brazilian real	1,800	771		(45		)
Indian rupee	55,300	885		(10		)
South African rand	4,900	481		(8		)
South Korean won	306,000	289		—
				$	104



	Notional Value Local Currency	Notional Value Euro	Fair Value Gain (Loss) USD
Forward contracts bought:
United States dollar	10,500	7,728	$	(26	)
			$	(26	)



	Derivatives not Designated as Hedging Instruments
	2013		2012
Foreign currency forward contracts, fair value included in:
Other Current Assets	$	625	$	101
Accrued Liabilities	547		130



		Amount of Gain or (Loss) Recognized In Income on Derivative Year Ended November 30,
Derivatives not Designated as Hedging Instruments	Location	2013		2012
Foreign Currency Contracts	Other income/(expense)	$	1,587	$	2,961

Currently, we do not have master netting agreements with our counterparties for our forward contracts. We mitigate the credit risk of these derivatives by transacting with highly rated counterparties. As of November 30, 2013, we have evaluated the credit and non-performance risks associated with our derivative counterparties, and we believe that the impact of the credit risk associated with our outstanding derivatives was insignificant.