Company: AOSL
Filing Date: 2025-08-28
Form Type: 10-K
Source: 0001628280-25-041297
Chunk: 151

Company: ALPHA & OMEGA SEMICONDUCTOR Ltd
Filing Date: 2025-08-28
Form: 10-K
Item: Item 7A
Chunk 151
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Item 7A.Quantitative and Qualitative Disclosures About Market Risk 

Foreign currency risk 

    We and our principal subsidiaries use U.S. dollars as our functional currency because most of the transactions are conducted and settled in U.S. dollars.  All of our revenue and a significant portion of our operating expenses are denominated in U.S. dollars.  The functional currency for our in-house packaging and testing facilities in China is U.S. dollars and a significant portion of our capital expenditures are denominated in U.S. dollars.  However, foreign currencies are required to fund our overseas operations, primarily in Taiwan and China.  Operating expenses of overseas operations are denominated in their respective local currencies.  In order to minimize exposure to foreign currencies, we maintained cash and cash equivalent balances in foreign currencies, including Chinese Yuan as operating funds for our foreign operating expenses.  For our subsidiaries which use the local currency as the functional currency, the results and financial position are translated into U.S. dollars using exchange rates at balance sheet dates for assets and liabilities and using average exchange rates for income and expenses items.  The resulting translation differences are presented as a separate component of accumulated other comprehensive income (loss) in the consolidated statements of equity.  Our management believes that our exposure to foreign currency translation risk is not significant based on a 10% sensitivity analysis in foreign currencies due to the fact that the net assets denominated in foreign currencies pertaining to foreign operations, principally in Taiwan and China, are not significant to our consolidated net assets. 

Interest rate risk 

Our interest-bearing assets comprise mainly interest-bearing short-term bank balances.  We manage our interest rate risk by placing such balances in instruments with various short-term maturities.  Borrowings expose us to interest rate risk.  Borrowings are drawn down after due consideration of market conditions and expectation of future interest rate movements.  As of June 30, 2025, we had $26.7 million outstanding under our loan and $2.3 million outstanding under our financing leases, which were subject to fluctuations in interest rates.  For the year ended June 30, 2025, a hypothetical 10% increase in the interest rate could result in $0.1 million additional annual interest expense.  The hypothetical assumptions made above will be different from what actually occurs in the future.  Furthermore, the computations do not anticipate actions that may be taken by our management should the hypothetical market changes actually occur over time.  As a result, actual impacts on our results of operations