Amgen 2010 Annual Report Download - page 157

following tables present the carrying values and estimated fair values of our borrowings as of December 31, 2010
and 2009 (in millions):
Carrying value Fair value Carrying value Fair value
2010 2009
2011 Convertible Notes ....................... $ 2,488 $ 2,501 $ 2,342 $ 2,487
2013 Convertible Notes ....................... 2,213 2,479 2,088 2,374
2017 Notes ................................ 1,099 1,280 1,099 1,207
2014 Notes ................................ 1,000 1,101 1,000 1,075
2019 Notes ................................ 998 1,139 998 1,077
2039 Notes ................................ 996 1,149 995 1,102
2037 Notes ................................ 899 1,027 899 988
October 2020 Notes .......................... 897 857 — —
2040 Notes ................................ 696 734 — —
2041 Notes ................................ 595 564 — —
2018 Notes ................................ 499 584 499 551
2038 Notes ................................ 499 607 499 582
March 2020 Notes ........................... 300 311 — —
Other notes ................................ 183 214 182 206
Total.................................. $13,362 $14,547 $10,601 $11,649
18. Derivative instruments
The Company is exposed to risks related to its business operations, certain of which are managed through
derivative instruments. The risks that we manage by using derivative instruments are foreign exchange rate risk and
interest rate risk. We use financial instruments including foreign currency forward, foreign currency option, forward
interest rate and interest rate swap contracts, to reduce our risk to these exposures. We do not use derivatives for
speculative trading purposes.
We recognize all of our derivative instruments as either assets or liabilities at fair value in the Consolidated
Balance Sheets. (See Note 17, Fair value measurement.) The accounting for changes in the fair value of a derivative
instrument depends on whether it has been formally designated and qualifies as part of a hedging relationship under
the applicable accounting standards and, further, on the type of hedging relationship. For derivatives formally
designated as hedges, we assess both at inception and quarterly thereafter, whether the hedging derivatives are
highly effective in offsetting changes in either the fair value or cash flows of the hedged item. Our derivatives that
are not designated and do not qualify as hedges are adjusted to fair value through current earnings.
Cash flow hedges
We are exposed to possible changes in values of certain anticipated foreign currency cash flows resulting from
changes in foreign currency exchange rates, associated primarily with our international product sales denominated
in Euros. Increases or decreases in the cash flows associated with our international product sales due to movements
in foreign currency exchange rates are partially offset by the corresponding increases and decreases in our
international operating expenses resulting from these foreign currency exchange rate movements. To further reduce
our exposure to foreign currency exchange rate fluctuations on our international product sales, we enter into foreign
currency forward and option contracts to hedge a portion of our projected international product sales primarily over
a three-year time horizon with, at any given point in time, a higher percentage of nearer term projected product sales
being hedged than successive periods. As of December 31, 2010 and 2009, we had open foreign currency forward
contracts with notional amounts of $3.2 billion and $3.4 billion, respectively, and open foreign currency option
contracts with notional amounts of $398 million and $376 million, respectively. These foreign currency forward and
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AMGEN INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)