Crucial 2013 Annual Report Download - page 88

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87
In connection with the currency exchange rate risk associated with our acquisition of Elpida and the Rexchip shares from
the Powerchip Group, we entered into currency exchange transactions (the "Elpida Hedges" and the "Rexchip Hedges" and,
together, the "Elpida Acquisition Hedges"). The Elpida Acquisition Hedges were not designated for hedge accounting and were
remeasured at fair value each period with gains and losses reflected in other non-operating income (expense). We recorded
losses from the Elpida Acquisition Hedges in 2013 of $228 million and gains in 2012 of $8 million. To mitigate the risk that
increases in exchange rates have on the payments due in 2014 and 2015, we entered into forward contracts to purchase
20 billion yen on November 28, 2014 and 10 billion yen on November 27, 2015.
We entered into interest rate swap contracts that mature in 4 years to hedge against the variability of future interest
payments due on our $312 million floating rate debt. We designated 80% of the swaps as cash flow hedges and the remaining
20% were not designated for hedge accounting treatment. Changes in the fair value of the undesignated portion are included in
interest income (expense). The fair values of the interest rate swaps are calculated by discounting the expected future cash
flows based on inputs that are readily available in publicly quoted markets (Level 2 fair value measurements).
Total gross notional amounts and fair values for currency derivatives and interest rate swaps without hedge accounting
designation were as follows:
Notional
Amount
(in U.S.
Dollars)
Fair Value of
Current
Assets(1) Noncurrent
Assets(2) (Current
Liabilities)(3)
As of August 29, 2013
Currency forward contracts:
Yen $ 336 $ 1 $ 3 $ —
Singapore dollar 218 — — —
Euro 217 1 — (1)
Shekel 78 — — (1)
Currency options:
New Taiwan dollar 351 — — —
Interest rate swap contracts 62 — — —
$ 1,262 $ 2 $ 3 $ (2)
As of August 30, 2012
Forward contracts:
Singapore dollar $ 251 $ — $ — $ (1)
Euro 173 2 — (1)
Shekel 65 — — (1)
Yen 18 — — —
Currency options:
Yen 5,050 (4) 57 — —
New Taiwan dollar 342 2 — —
$ 5,899 $ 61 $ — $ (3)
(1) Included in receivables - other.
(2) Included in other noncurrent assets.
(3) Included in accounts payable and accrued expenses - other.
(4) Notional amount includes purchased options of $2,527 million and sold options of $2,523 million for the Elpida Hedges.
For currency forward contracts and options without hedge accounting designation, we recognized net losses of
$222 million for 2013, net losses of $17 million for 2012 and net gains of $21 million for 2011, which were included in other
non-operating income (expense).