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The Company had net deferred losses of $175 million and $240 million associated with cash flow hedges, net of
taxes, recorded in AOCI as of September 28, 2013 and September 29, 2012, respectively. Deferred gains and
losses associated with cash flow hedges of foreign currency revenue are recognized as a component of net sales
in the same period as the related revenue is recognized, and deferred gains and losses related to cash flow hedges
of inventory purchases are recognized as a component of cost of sales in the same period as the related costs are
recognized. Deferred gains and losses associated with cash flow hedges of interest income or expense are
recognized as a component of other income/(expense), net in the same period as the related income or expense is
recognized. The Company’s hedged foreign currency transactions and hedged interest rate transactions as of
September 28, 2013 are expected to occur within 12 months and five years, respectively.
Derivative instruments designated as cash flow hedges must be de-designated as hedges when it is probable the
forecasted hedged transaction will not occur in the initially identified time period or within a subsequent two-
month time period. Deferred gains and losses in AOCI associated with such derivative instruments are
reclassified immediately into other income and expense. Any subsequent changes in fair value of such derivative
instruments are reflected in other income and expense unless they are re-designated as hedges of other
transactions. The Company did not recognize any significant net gains or losses related to the loss of hedge
designation on discontinued cash flow hedges during 2013, 2012 and 2011.
The Company’s unrealized net gains and losses on net investment hedges, included in the cumulative translation
adjustment account of AOCI, were not significant as of September 28, 2013 and September 29, 2012. The
ineffective portions of and amounts excluded from the effectiveness test of net investment hedges are recorded in
other income and expense.
The gain/loss recognized in other income and expense for foreign currency forward and option contracts not
designated as hedging instruments was not significant during 2013, 2012 and 2011, respectively. These amounts
represent the net gain or loss on the derivative contracts and do not include changes in the related exposures,
which generally offset a portion of the gain or loss on the derivative contracts.
The following table shows the notional principal amounts of the Company’s outstanding derivative instruments
and credit risk amounts associated with outstanding or unsettled derivative instruments as of September 28, 2013
and September 29, 2012 (in millions):
2013 2012
Notional
Principal
Credit
Risk
Amounts
Notional
Principal
Credit
Risk
Amounts
Instruments designated as accounting hedges:
Foreign exchange contracts ............................... $35,013 $ 159 $41,970 $ 140
Interest rate contracts .................................... $ 3,000 $ 44 $ 0 $ 0
Instruments not designated as accounting hedges:
Foreign exchange contracts ............................... $16,131 $ 25 $13,403 $ 12
The notional principal amounts for outstanding derivative instruments provide one measure of the transaction
volume outstanding and do not represent the amount of the Company’s exposure to credit or market loss. The credit
risk amounts represent the Company’s gross exposure to potential accounting loss on derivative instruments that are
outstanding or unsettled if all counterparties failed to perform according to the terms of the contract, based on
then-current currency or interest rates at each respective date. The Company’s gross exposure on these transactions
may be further mitigated by collateral received from certain counterparties. The Company’s exposure to credit loss
and market risk will vary over time as a function of currency and interest rates. Although the table above reflects the
notional principal and credit risk amounts of the Company’s derivative instruments, it does not reflect the gains or
losses associated with the exposures and transactions that the instruments are intended to hedge. The amounts
ultimately realized upon settlement of these financial instruments, together with the gains and losses on the
underlying exposures, will depend on actual market conditions during the remaining life of the instruments.
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