Emerson 2011 Annual Report Download - page 39

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Annual Report | 37
(7) Financial Instruments
HEDGING ACTIVITIES
The notional value of foreign currency hedge positions was approximately $1.5 billion as of September 30, 2011.
Commodity hedges outstanding as of September 30, 2011 included a total of approximately 107 million pounds of
copper and aluminum. All derivatives receiving deferral accounting are cash flow hedges. The majority of hedging gains
and losses deferred as of September 30, 2011 are expected to be recognized over the next 12 months as the underlying
forecasted transactions occur. Amounts included in earnings and other comprehensive income follow:
gain (loss) to other
gain (loss) to earnings comprehensive income
2009 2010 2011 2009 2010 2011
Deferred Location
Foreign currency Sales $ (24) (5) 11 (18) 11 2
Foreign currency Cost of sales (32) 6 22 (40) 30 (16)
Commodity Cost of sales (96) 42 52 (40) 44 (58)
Not Deferred
Foreign currency Other deductions, net (67) 117 10
Commodity Cost of sales (11) – (1)
Total $(230) 160 94 (98) 85 (72)
Regardless of whether or not derivatives receive deferral accounting, the Company expects hedging gains or losses to
be essentially offset by losses or gains on the related underlying exposures. The amounts ultimately recognized will
differ from those presented above for any open positions, which remain subject to ongoing market price fluctuations
until settlement. Derivatives receiving deferral accounting are highly effective, no amounts were excluded from the
assessment of hedge effectiveness, and hedge ineffectiveness was immaterial in 2011, 2010 and 2009, including gains
or losses on derivatives that were discontinued because forecasted transactions were no longer expected to occur.
FAIR VALUE MEASUREMENTS
Fair values of derivative contracts outstanding as of September 30 follow:
assets liaBilities assets liaBilities
2010 2010 2011 2011
Exposure
Foreign currency $67 (50) 17 (48)
Commodity $31 (3) – (83)
The Company posted $53 of collateral as of September 30, 2011. The maximum collateral the Company could have
been required to post as of September 30, 2011 was $116. The fair value of long-term debt was $5,276 and $5,292,
respectively, as of September 30, 2011 and 2010, which exceeded the carrying value by $673 and $635, respectively.