Comcast 2014 Annual Report Download - page 85

Table of Contents
See Note 2 to each of the Comcast and NBCUniversal consolidated financial statements for additional information on our
accounting policies for derivative financial instruments.
Foreign Exchange Risk Management
NBCUniversal has significant operations in a number of countries outside the United States, and certain of NBCUniversal’
s
operations are conducted in foreign currencies. The value of these currencies fluctuates relative to the U.S. dollar. These changes
could adversely affect the U.S. dollar value of our non-
U.S. revenue and operating costs and expenses and reduce international
demand for our content, all of which could negatively affect our business, financial condition and results of operations in a given
period or in specific territories.
As part of our overall strategy to manage the level of exposure to the risk of foreign exchange rate fluctuations, NBCUniversal
enters into derivative financial instruments related to a significant portion of its foreign currency exposures. NBCUniversal enters
into foreign currency forward contracts that change in value as foreign exchange rates change to protect the U.S. dollar equivalent
value of its foreign currency assets, liabilities, commitments, and forecasted foreign currency revenue and expenses. In accordance
with our policy, NBCUniversal hedges forecasted foreign currency transactions for periods generally not to exceed 18 months. In
certain circumstances, NBCUniversal enters into foreign exchange contracts with initial maturities in excess of 18 months. As of
December 31, 2014 and 2013, NBCUniversal had foreign exchange contracts with a total notional value of $890 million and $968
million, respectively. As of December 31, 2014 and 2013, the aggregate estimated fair value of these foreign exchange contracts
was not material.
We have analyzed our foreign currency exposures related to NBCUniversal’
s operations as of December 31, 2014, including our
hedging contracts, to identify assets and liabilities denominated in a currency other than their functional currency. For those assets
and liabilities, we then evaluated the effect of a 10% shift in currency exchange rates between the functional currency and the U.S.
dollar. Our analysis of such a shift in exchange rates indicated that there would be an immaterial effect on our 2014 income.
Comcast is also exposed to the market risks associated with fluctuations in foreign exchange rates as they relate to its foreign
currency denominated debt obligations. Cross-currency swaps are used to effectively convert fixed-
rate foreign currency
denominated debt to fixed-
rate U.S. dollar denominated debt, in order to hedge the risk that the cash flows related to annual
interest payments and the payment of principal at maturity may be adversely affected by fluctuations in currency exchange rates.
The gains and losses on the cross-
currency swaps offset changes in the U.S. dollar equivalent value of the related exposures. As
of December 31, 2014 and 2013, the fair value of our cross-currency swaps on our £
625 million principal amount of 5.50% senior
notes due 2029 was an asset of $37 million and $73 million, respectively.
Counterparty Credit Risk Management
Comcast and NBCUniversal manage the credit risks associated with our derivative financial instruments through diversification and
the evaluation and monitoring of the creditworthiness of the counterparties. Although we may be exposed to losses in the event of
nonperformance by the counterparties, we do not expect such losses, if any, to be significant. Comcast has agreements with
certain counterparties that include collateral provisions. These provisions require a party with an aggregate unrealized loss position
in excess of certain thresholds to post cash collateral for the amount in excess of the threshold. The threshold levels in our
collateral agreements are based on our and the counterparties’
credit ratings. As of December 31, 2014 and 2013, Comcast was
not required to post collateral under the terms of these agreements. As of December 31, 2014, the collateral that Comcast held
from certain of its counterparties under the terms of these agreements was not material.
Comcast 2014 Annual Report on Form 10
-
K
80