Comcast 2007 Annual Report Download - page 37

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We use the notional amounts on the instruments to calculate
the interest to be paid or received. The notional amounts do
not represent the amount of our exposure to credit loss. The esti-
mated fair value approximates the payments necessary or proceeds
to be received to settle the outstanding contracts. We estimate inter-
est rates on variable debt and swaps using the average implied
forward London Interbank Offered Rate (“LIBOR”) for the year of
maturity based on the yield curve in effect on December 31, 2007,
plus the applicable margin in effect on December 31, 2007.
As a matter of practice, we typically do not structure our financial
contracts to include credit-ratings-based triggers that could affect
our liquidity. In the ordinary course of business, some of our
swaps could be subject to termination provisions if we do not
maintain investment grade credit ratings. As of December 31,
2007 and 2006, the estimated fair value of those swaps was a
liability of $3 million and $60 million, respectively. The amount to
be paid or received upon termination, if any, would be based on
the fair value of the outstanding contracts at that time.
Equity Price Risk Management
We are exposed to the market risk of changes in the equity prices
of our investments in marketable securities. We enter into various
derivative transactions in accordance with our policies to manage
the volatility relating to these exposures.
Through market value and sensitivity analyses, we monitor our
equity price risk exposures to ensure that the instruments are
matched with the underlying assets or liabilities, reduce our risks
relating to equity prices and maintain a high correlation to the risk
inherent in the hedged item.
To limit our exposure to and benefits from price fluctuations in the
common stock of some of our investments, we use equity deriva-
tive financial instruments. These derivative financial instruments,
which are accounted for at fair value, include equity collar agree-
ments, prepaid forward sales agreements and indexed or ex-
changeable debt instruments.
Except as described above in “Investment Income (Loss), Net,” the
changes in the fair value of the investments that we accounted for
as trading securities were substantially offset by the changes in the
fair values of the equity derivative financial instruments.
Refer to Note 2 to our consolidated financial statements for a dis-
cussion of our accounting policies for derivative financial instru-
ments and to Note 6 and Note 8 to our consolidated financial
statements for discussions of our derivative financial instruments.
35 Comcast 2007 Annual Report on Form 10-K