Alcoa 2009 Annual Report Download - page 146
Download and view the complete annual report
Please find page 146 of the 2009 Alcoa annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.-
1 -
2
-
3
-
4
-
5
-
6
-
7
-
8
-
9
-
10
-
11
-
12
-
13
-
14
-
15
-
16
-
17
-
18
-
19
-
20
-
21
-
22
-
23
-
24
-
25
-
26
-
27
-
28
-
29
-
30
-
31
-
32
-
33
-
34
-
35
-
36
-
37
-
38
-
39
-
40
-
41
-
42
-
43
-
44
-
45
-
46
-
47
-
48
-
49
-
50
-
51
-
52
-
53
-
54
-
55
-
56
-
57
-
58
-
59
-
60
-
61
-
62
-
63
-
64
-
65
-
66
-
67
-
68
-
69
-
70
-
71
-
72
-
73
-
74
-
75
-
76
-
77
-
78
-
79
-
80
-
81
-
82
-
83
-
84
-
85
-
86
-
87
-
88
-
89
-
90
-
91
-
92
-
93
-
94
-
95
-
96
-
97
-
98
-
99
-
100
-
101
-
102
-
103
-
104
-
105
-
106
-
107
-
108
-
109
-
110
-
111
-
112
-
113
-
114
-
115
-
116
-
117
-
118
-
119
-
120
-
121
-
122
-
123
-
124
-
125
-
126
-
127
-
128
-
129
-
130
-
131
-
132
-
133
-
134
-
135
-
136 -
137 -
138 -
139 -
140 -
141 -
142 -
143 -
144 -
145 -
146 -
147 -
148 -
149 -
150 -
151 -
152 -
153 -
154 -
155 -
156 -
157
-
158
-
159
-
160
-
161
-
162
-
163
-
164
-
165
-
166
-
167
-
168
-
169
-
170
-
171
-
172
-
173
-
174
-
175
-
176
-
177
-
178
 |
 |
The following table presents Alcoa’s derivative contract assets and liabilities that are measured and recognized at fair
value on a recurring basis classified under the appropriate level of the fair value hierarchy:
December 31, 2009 2008
Assets:
Level 1 $110 $ 79
Level 2 107 160
Level 3 -–
Margin held* (60) (67)
Total $157 $ 172
Liabilities:
Level 1 $ 61 $ 569
Level 2 75 30
Level 3 831 341
Margin posted* (37) (119)
Total $930 $ 821
* Margin held represents cash collateral received related to aluminum and energy contracts included in Level 1 and
interest rate contracts included in Level 2 and margin posted represents cash collateral paid related to aluminum
contracts included in Level 1 and energy contracts included in Level 3. Alcoa elected to net the margin held and
posted against the fair value amounts recognized for derivative instruments executed with the same counterparties
under master netting arrangements.
Financial instruments classified as Level 3 in the fair value hierarchy represent derivative contracts in which
management has used at least one significant unobservable input in the valuation model. The following table presents a
reconciliation of activity for such derivative contracts on a net basis:
2009 2008
Balance at beginning of year $341 $408
Total realized/unrealized (losses) or gains included in:
Sales (16) (54)
Cost of goods sold (37) –
Other income, net (1) 3
Other comprehensive loss (income) 507 (35)
Purchases, sales, issuances, and settlements* 6 19
Transfers in and (or) out of Level 3** 31 –
Balance at end of year $831 $341
Total (losses) or gains included in earnings attributable to the change in unrealized gains or losses
relating to derivative contracts still held at December 31, 2009 and 2008:
Sales $ (16) $ (54)
Cost of goods sold (37) –
Other income, net (1) 3
* In 2009, there was an indirect purchase of a Level 3 embedded derivative in a power contract, which is linked to the
LME and a foreign exchange rate, related to the Elkem transaction (see Note F).
**In 2009, an existing power contract no longer qualified for the normal purchase normal sale exception under
derivative accounting. As a result, this contract is now accounted for as a derivative and was recorded at fair value.
As reflected in the table above, the net unrealized loss on derivative contracts using Level 3 valuation techniques was
$831 and $341 as of December 31, 2009 and 2008, respectively. These losses were mainly attributed to embedded
derivatives in power contracts that index the price of power to the London Metal Exchange (LME) price of aluminum.
138