Discover 2011 Annual Report Download - page 159

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147
Derivatives not designated as Hedges
Foreign Exchange Forward Contracts. The Company has derivatives that are economic hedges and are not designated as
hedges for accounting purposes. The Company enters into foreign exchange forward contracts to manage foreign currency risk.
Foreign exchange forward contracts involve the purchase or sale of a designated currency at an agreed upon rate for settlement
on a specified date. Changes in the fair value of these contracts are recorded in other income.
Interest Rate Swaps. The Company also may have from time to time interest rate swap agreements that are not
designated as hedges. As part of its acquisition of SLC, the Company also acquired an interest rate swap related to the
securitized debt assumed in the SLC transaction. Such agreements are not speculative and are also used to manage interest rate
risk but are not designated for hedge accounting. Changes in the fair value of these contracts are recorded in other income.
The following table summarizes the fair value (including accrued interest) and related outstanding notional amounts of
derivative instruments and indicates where within the statement of financial condition each is reported as of November 30,
2011 and 2010. See Note 22: Fair Value Disclosures for a description of the valuation methodologies of derivatives. (In
thousands, except number of transactions):
Derivatives designated as hedges:
Interest rate swaps—Cash Flow hedge
Interest rate swaps—Fair Value hedge
Derivatives not designated as hedges:
Foreign exchange forward contracts(1)
Interest rate swap
November 30, 2011
Notional
Amount
$ 2,000,000
$ 2,338,276
$ 21,453
$ 1,294,932
Number of
Transactions
8
113
3
1
Balance Sheet Location
Other
Assets
(At Fair
Value)
$ 12,191
$ 44,171
$—
$ 7,214
Accrued
Expenses and
Other
Liabilities
(At Fair
Value)
$—
$ 279
$ 169
$—
November 30, 2010
Notional
Amount
$ 2,000,000
$ 400,000
$ 7,800
$—
Balance Sheet Location
Other
Assets
(At Fair
Value)
$ 4,989
$—
$6
$—
Accrued
Expenses
and
Other
Liabilities
(At Fair
Value)
$—
$ 6,587
$7
$—
(1) The foreign exchange forward contracts have notional amounts of EUR 14 million and GBP 1.7 million as of November 30, 2011 and EUR 4.0 million
and GBP 1.7 million as of November 30, 2010.
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