Comfort Inn 2013 Annual Report Download - page 80

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Table of Contents
effect of inter-company transactions of a short-term or trading nature in SG&A expenses on the consolidated statements of income. Foreign currency
transaction gains and losses for the years ended December 31, 2013, 2012 and 2011 were a $0.4 million loss, $0.1 million gain and a $1.4 million loss,
respectively.
Derivatives
The Company periodically uses derivative instruments as part of its overall strategy to manage exposure to market risks associated with fluctuations in
interest rates. All outstanding derivative financial instruments are recognized at their fair values as assets or liabilities. The impact on earnings from
recognizing the fair values of these instruments depends on their intended use, their hedge designation and their effectiveness in offsetting changes in the fair
values of the exposures they are hedging. The Company does not use derivatives for trading purposes.
The effective portion of changes in fair value of derivatives designated as cash flow hedging instruments are recorded as a component of accumulated
other comprehensive income (loss) and the ineffective portion is reported currently in earnings. The amounts included in accumulated other comprehensive
income are reclassified into earnings in the same period during which the hedged item affects earnings. Amounts reported in earnings are classified consistent
with the item being hedged.
The Company formally documents all relationships between its hedging instruments and hedged items at inception, including its risk management
objective and strategy for establishing various hedge relationships. Cash flows from hedging instruments are classified in the consolidated statements of cash
flows consistent with the items being hedged.
Hedge accounting is discontinued prospectively when (i) the derivative instrument is no longer effective in offsetting changes in fair value or cash flows
of the underlying hedged item, (ii) the derivative instrument expires, is sold, terminated or exercised, or (iii) designating the derivative instrument as a hedge is
no longer appropriate. The effectiveness of derivative instruments is assessed at inception and on an ongoing basis.
Guarantees
The Company has historically issued certain guarantees to support the growth of its brands. A liability is recognized for the fair value of such
guarantees upon inception of the guarantee and upon any subsequent modification, such as renewals, when the Company remains contingently liable. The fair
value of a guarantee is the estimated amount at which the liability could be settled in a current transaction between willing unrelated parties. The Company
evaluates these guarantees on a quarterly basis.
Recently Adopted Accounting Guidance
In February 2013, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2013-02,
"Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income" (“ASU 2013-02”). This update
requires companies to present either in a single note or parenthetically on the face of the financial statements the effect of significant amounts reclassified from
each component of accumulated other comprehensive income based on its source and the income statement line items affected by the reclassification. If a
component is not required to be reclassified to net income in its entirety companies would instead cross reference to the related footnote for additional
information. ASU 2013-02 became effective for interim and annual periods beginning after December 15, 2012 and the Company adopted this ASU during
the first quarter of 2013. The Company has elected to present the required disclosures in a single note rather than on the face of the financial statement. See
Note 19 for additional information.
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