Eli Lilly 2008 Annual Report Download - page 66

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FINANCIALS
64
Note 15: Other Comprehensive Income (Loss)
The accumulated balances related to each component of other comprehensive income (loss) were as follows:
Foreign Unrealized Defi ned Benefi t Effective Accumulated
Currency Gains Pension and Portion of Other
Translation (Losses) Retiree Health Cash Flow Comprehensive
Gains (Losses) on Securities Benefi t Plans Hedges Income (Loss)
Beginning balance at January 1, 2008. . . . . . $1,317.0 $ 14.6 $ (1,151.6) $(166.8) $ 13.2
Other comprehensive income (loss) . . . . . . . (766.1) (125.8) (1,924.8) 16.7 (2,800.0)
Balance at December 31, 2008. . . . . . . . . . . . $ 550.9 $(111.2) $(3,076.4) $(150.1) $(2,786.8)
The amounts above are net of income taxes. The income taxes associated with the unrecognized net actuarial
losses and prior service costs on our defi ned benefi t pension and retiree health benefi t plans (Note 13) were a ben-
efi t of $1.02 billion for 2008. The income taxes related to the other components of comprehensive income were not
signifi cant, as income taxes were not provided for foreign currency translation.
The unrealized gains (losses) on securities is net of reclassifi cation adjustments of $1.7 million, $5.8 million,
and $16.9 million, net of tax, in 2008, 2007, and 2006, respectively, for net realized gains on sales of securities
included in net income. The effective portion of cash fl ow hedges is net of reclassifi cation adjustments of $9.6 mil-
lion, $8.8 million, and $2.3 million, net of tax, in 2008, 2007, and 2006, respectively, for realized losses on foreign
currency options and $7.9 million, $11.6 million, and $17.1 million, net of tax, in 2008, 2007, and 2006, respectively,
for interest expense on interest rate swaps designated as cash fl ow hedges.
Generally, the assets and liabilities of foreign operations are translated into U.S. dollars using the current
exchange rate. For those operations, changes in exchange rates generally do not affect cash fl ows; therefore,
resulting translation adjustments are made in shareholders’ equity rather than in income.