3. FINANCIAL INSTRUMENTS AND RISK

For certain of the Company’s financial instruments including cash and cash equivalents, amounts receivable, and accounts payable carrying values approximate fair value due to their short-term nature. The Company’s cash equivalents and short-term investments are recorded at fair value.

Financial risk is the risk to the Company’s results of operations that arises from fluctuations in interest rates and foreign exchange rates and the degree of volatility of these rates as well as credit risk associated with the financial stability of the issuers of the financial instruments. Foreign exchange rate risk arises as a portion of the Company’s investments which finance operations and a portion of the Company’s expenses are denominated in other than U.S. dollars.

The Company invests its excess cash in accordance with investment guidelines, which limit the credit exposure to any one financial institution or corporation other than securities issued by the U.S. government. The Company only invests in A (or equivalent) rated securities with maturities of one year or less. These securities generally mature within one year or less and in some cases are not collateralized. At December 31, 2011 the average days to maturity of the Company’s portfolio of cash equivalents and marketable securities was 131 days (December 31, 2010—172 days). The Company does not use derivative instruments to hedge against any of these financial risks.