First Data 2007 Annual Report Download - page 116

FIRST DATA CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Fair Value Hedges
As discussed above in Note 2 and in connection with the merger, the Company terminated the interest rate swaps associated with its debt in connection
with the repurchase of the underlying debt. Additionally, the Company terminated the interest rate swaps associated with the long-term investment portfolio of
the official check and money order businesses. These hedges qualified for the short-cut method of accounting as described in paragraph 68 of SFAS 133.
Accordingly, there was no ineffectiveness related to these interest rate swaps. The aggregate notional amount of these interest rate swaps was $1.5 billion and
$7.6 billion at December 31, 2006, respectively. Subsequent to the merger, the Company had no outstanding fair value hedges that qualified for hedge
accounting.
Accumulated Derivative Gains or Losses
The following table summarizes activity in other comprehensive income for the years ended December 31, 2007 and 2006 related to derivative
instruments classified as cash flow hedges and net investment hedges held by the Company (in millions):
Successor Predecessor
Period from
September 25
through
December 31,
2007
Period from
January 1
through
September 24,
2007
Year Ended
December 31,
2006
Accumulated loss included in other comprehensive income at beginning of the period $ — $ (43.7) $ (15.7)
Less: Reclassifications into earnings from other comprehensive income — 3.3 1.9
— (40.4) (13.8)
Losses in fair value of derivatives (a) (106.5) (25.0) (29.9)
Less: Purchase accounting adjustments due to merger — 65.4 —
Accumulated loss included in other comprehensive income at end of the period $ (106.5) $ — $ (43.7)
(a) – Losses are included in unrealized gains (losses) on hedging activities and in foreign currency translation adjustment on the Consolidated Statements
of Stockholders' Equity.
Note 9: Income Taxes
Successor Predecessor
Period from
September 25
through
December 31,
2007
Period from
January 1
through
September 24,
2007
Year Ended December 31,
(in millions) 2006 2005
Components of pretax (loss) income before discontinued operations and certain minority interest
adjustments:
Domestic $ (511.9) $ 454.1 $ 951.2 $ 996.3
Foreign 34.0 137.4 102.9 (1.1)
$ (477.9) $ 591.5 $ 1,054.1 $ 995.2
Provision (benefit) for income taxes before discontinued operations and certain minority interest
adjustments:
Federal $ (182.9) $ 55.0 $ 148.2 $ 146.4
State and local (5.8) 36.3 34.2 28.6
Foreign 12.6 34.5 21.3 13.3
$ (176.1) $ 125.8 $ 203.7 $ 188.3
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