FORM 20-F - Check Point

Financial Income, Net
Net financial income consists primarily of interest earned on cash equivalents and marketable securities.
Net financial income was $49.7 million in 2007, $40.9 million in 2008, and $32.1 million in 2009. Because we
generally hold debt securities until maturity, our current portfolio’s yield is derived primarily from market interest
rates and the yield of securities on the date of the investment. Since most of our investments are in U.S. dollars, our
financial income is heavily dependent on prevailing U.S. interest rates. The decrease in net financial income in
2008 and 2009 was primarily due to the decrease in interest rates in the U.S.
We review various factors in determining whether we should recognize an impairment charge for our
marketable securities, including whether the Company intends to sell, or it is more likely than not that the Company
will be required to sell before recovery of their amortized cost basis, the length of time and extent to which the fair
value has been less than its cost basis, the credit ratings of the securities, the nature of underlying collateral as
applicable and the financial condition, expected cash flow and near-term prospects of the issuer. Based on our
consideration of these factors, in 2008 we recognized an other-than-temporary impairment on marketable securities
in the total amount of $11.2 million, pretax, out of which $6.3 million, pretax, was related to Auction Rate
Securities. The remaining impairment of $4.9 million related to corporate obligations of U.S. corporate issuers with
the original principal amounting to $8.0 million. In 2009, we recognized an other-than-temporary impairment on
marketable securities in the total amount of $3.1 million, pre-tax, related to our Auction Rate Securities which was
offset by a gain of $1.9 million, pre-tax, related to the sale of marketable securities previously impaired in 2008. In
evaluating when declines in fair value are other-than-temporary, we considered all available evidence, including
market declines subsequent to the end of the period. We may recognize additional losses in the future should the
market prospects of the issuers of these securities continue to deteriorate.
Because interest rates in the U.S. remained low in the first quarter of 2010 and are not expected to
significantly increase during 2010, we believe that this trend will result in a lower portfolio yield in the near term.
See also Item 3, “Risk Factors – Risks Related to Our Business and Our Market – We Face the Risk of a Decrease
in Our Cash Balances and Losses in Our Investment Portfolio.”
Taxes on Income
Our effective tax rate was 15% in 2007, 16% in 2008 and 20% in 2009. Our effective tax rate increased in
2008 and again in 2009, despite the decrease in the statutory tax rate in Israel from 27% in 2008 to 26% in 2009, as
a result of an increase in taxable income of certain of our foreign subsidiaries and an increase in tax positions. See
Note 11 to our consolidated financial statements for further information.
Additional details are provided in “Item 10 – Additional Information” under the caption “Israeli taxation,
foreign exchange regulation and investment programs” and “Item 3 – Key Information” under the caption “The tax
benefits available to us under Israeli law require us to meet several conditions, and may be terminated or reduced in
the future, which would increase our taxes.”
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