AbbVie 2012 Annual Report Download - page 64
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government devalued the official exchange rate from 4.3 to 6.3, which is not expected to have a
material impact on the financial results of the company.
Interest Rate Risk
Interest rate swaps are used to manage the company’s exposure of changes in interest rates on
fixed-rate debt. The effect of these hedges is to change the fixed interest rate to a variable rate.
AbbVie does not use derivative instruments, such as interest rate swaps, to manage its exposure to
changes in interest rates for investment securities. At December 31, 2012, AbbVie had interest rate
hedge contracts totaling $8.0 billion. The company estimates that an increase in the interest rates of
100-basis points would decrease the fair value of our interest rate swap contracts by approximately
$510 million. If realized, the fair value reduction would affect earnings over the remaining life of the
contracts. The company estimates that an increase of 100-basis points in long-term interest rates would
decrease the fair value of long-term debt by $976 million. A 100-basis point change is believed to be a
reasonably possible near-term change in rates.
Market Price Sensitive Investments
AbbVie holds available-for-sale equity securities from strategic technology acquisitions. The market
value of these investments was approximately $12 million and $58 million as of December 31, 2012 and
2011, respectively. AbbVie monitors these investments for other than temporary declines in market
value, and charges impairment losses to income when an other than temporary decline in value occurs.
A hypothetical 20 percent decrease in the share prices of these investments would have an immaterial
decrease to their fair value at December 31, 2012. A 20 percent decrease is believed to be a reasonably
possible near-term change in share prices.
Non-Publicly Traded Equity Securities
AbbVie holds equity securities from strategic technology acquisitions that are not traded on public
stock exchanges. The carrying value of these investments was approximately $72 million and
$171 million as of December 31, 2012 and 2011, respectively. AbbVie monitors these investments for
other than temporary declines in market value, and charges impairment losses to income when an other
than temporary decline in estimated value occurs.
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