Comcast 2009 Annual Report Download - page 44

Table of Contents
Comcast 2009 Annual Report on Form 10-K
36
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
estimated fair value approximates the payments necessary or
proceeds to be received to settle the outstanding contracts.
We estimate interest 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, 2009, plus the applicable margin in
effect on December 31, 2009.
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, 2009 and 2008, the estimated fair value of
those swaps was an asset of $26 million and an asset of $44
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 derivative financial instruments. These derivative
financial instruments, which are accounted for at fair value,
include equity collar agreements, prepaid forward sale
agreements and indexed 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 or available for sale 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
discussion of our accounting policies for derivative financial
instruments and to Note 6 and Note 10 to our consolidated
financial statements for a discussion of our derivative
financial instruments.