3M 2013 Annual Report Download - page 98

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92
Net Investment Hedges:
As circumstances warrant, the Company uses cross currency swaps, forwards and foreign currency denominated debt to
hedge portions of the Company’s net investments in foreign operations. For hedges that meet the effectiveness
requirements, the net gains or losses attributable to changes in spot exchange rates are recorded in cumulative
translation within other comprehensive income. The remainder of the change in value of such instruments is recorded in
earnings. Recognition in earnings of amounts previously recorded in cumulative translation is limited to circumstances
such as complete or substantially complete liquidation of the net investment in the hedged foreign operation. At December
31, 2013, there were no cross currency swaps and foreign currency forward contracts designated as net investment
hedges.
In addition to the derivative instruments used as hedging instruments in net investment hedges, 3M also uses foreign
currency denominated debt as nonderivative hedging instruments in certain net investment hedges. In July and
December 2007, the Company issued seven-year fixed rate Eurobond securities for amounts of 750 million Euros and
275 million Euros, respectively. In November 2013, the Company issued eight-year fixed rate Eurobond securities for 600
million Euros. 3M designated each of these Eurobond issuances as hedging instruments of the Company’s net investment
in its European subsidiaries.
In anticipation of the November 2013 Eurobond issuance, the Company entered into foreign currency forward contracts
with notional amounts totaling 594 million Euros. These forward contracts were designated as hedging instruments of the
Company’s net investment in its European subsidiaries. These contracts matured in November 2013.
The location in the consolidated statements of income and comprehensive income and amounts of gains and losses
related to derivative and nonderivative instruments designated as net investment hedges are as follows. There were no
reclassifications of the effective portion of net investment hedges out of accumulated other comprehensive income into
income for the periods presented in the table below.
Year ended December 31, 2013
Derivative and Nonderivative Instruments in Net Investment Hedging
Relationships
Pretax Gain (Loss)
Recognized as Cumulative
Translation within Other
Comprehensive Income
on Effective Portion of
Instrument
Ineffective Portion of Gain
(Loss) on Instrument and
Amount Excluded from
Effectiveness Testing
Recognized in Income
(Millions)
Amount
Location
Amount
Foreign currency denominated debt $
(82) N/A $
―
Foreign currency forward contracts 12 N/A ―
Total $
(70) $
―
Year ended December 31, 2012
Derivative and Nonderivative Instruments in Net Investment Hedging
Relationships
Pretax Gain (Loss)
Recognized as Cumulative
Translation within Other
Comprehensive Income
on Effective Portion of
Instrument
Ineffective Portion of Gain
(Loss) on Instrument and
Amount Excluded from
Effectiveness Testing
Recognized in Income
(Millions) Amount Location
Amount
Foreign currency denominated debt $
(29) N/A $
―
Total $
(29) $
―
Year ended December 31, 2011
Derivative and Nonderivative Instruments in Net Investment Hedging
Relationships
Pretax Gain (Loss)
Recognized as Cumulative
Translation within Other
Comprehensive Income
on Effective Portion of
Instrument
Ineffective Portion of Gain
(Loss) on Instrument and
Amount Excluded from
Effectiveness Testing
Recognized in Income
(Millions)
Amount
Location
Amount
Foreign currency denominated debt $
41 N/A $
―
Total $
41 $
―