Annual Report 2009 (1 MB, pdf) - Vasco

Item 7A - Quantitative and Qualitative Disclosures about Market Risk (In thousands)
Foreign Currency Exchange Risk – In 2009, approximately 93% of our business was conducted outside
the United States, primarily in Europe, Latin America and Asia/Pacific. A significant portion of our business
operations is transacted in foreign currencies. As a result, we have exposure to foreign exchange fluctuations. We
are affected by both foreign currency translation and transaction adjustments. Translation adjustments result from
the conversion of the foreign subsidiaries’ balance sheets and income statements to U.S. Dollars at year-end
exchange rates and weighted average exchange rates, respectively. Translation adjustments resulting from this
process are recorded directly into stockholders’ equity. Transaction adjustments result from currency exchange
movements when one of our companies transacts business in a currency that differs from its local currency.
These adjustments are recorded as gains or losses in our statements of operations. Our business transactions are
spread across numerous countries and currencies. This geographic diversity reduces the risk to our operating
results. As noted in Management’s Discussion and Analysis above, we attempt to minimize the net impact of
currency on operating earnings by denominating an amount of billings in a currency such that it would provide a
hedge against the operating expenses being incurred in that currency.
Interest Rate Risk – We have minimal interest rate risk. We had no debt outstanding at December 31,
2009. Our cash is invested in short-term instruments at current market rates. If rates were to increase or decrease
by one percentage point, the company’s interest income would increase or decrease approximately $676
annually.
Impairment Risk – At December 31, 2009, we had goodwill of $13,813 and other intangible assets of
$1,797, primarily related to the acquisition of Logico and Able in 2006. We will assess the net realizable value of
goodwill at least annually, and we will also assess the net realizable value of other intangible assets whenever
events or circumstances change indicating that the carrying value may not be recoverable. While we did not
experience impairment during the year ended December 31, 2009, we may incur impairment charges in future
periods.
Item 8 - Financial Statements and Supplementary Data
The information in response to this item is included in our consolidated financial statements, together
with the report thereon of KPMG LLP, appearing on pages F-1 through F-23 of this Form 10-K, and in Item 7
under the heading Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Item 9 - Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A - Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer,
who, respectively, are our principal executive officer and principal financial officer, conducted an evaluation of
the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e)
under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the fiscal quarter
ended December 31, 2009. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer
concluded that as of the end of the end of the fiscal quarter ended December 31, 2009, our disclosure controls
and procedures were effective to provide assurance that (i) the information required to be disclosed by us in our
reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the
time periods specified in the SEC’s rules and forms, and (ii) information required to be disclosed by us in our
reports that we file or submit under the Exchange Act is accumulated and communicated to our management,
including our principal executive and principal financial officers, or persons performing similar functions, as
appropriate to allow timely decisions regarding required disclosure.
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