Google 2010 Annual Report Download - page 78

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Other Derivatives
Other derivatives not designated as hedging instruments consist primarily of forward contracts that we use to
hedge intercompany balances and other monetary assets or liabilities denominated in currencies other than the
local currency of a subsidiary. We recognize gains and losses on these contracts, as well as the related costs in
interest and other income, net, along with the gains and losses of the related hedged items. The notional principal
of foreign exchange contracts to purchase U.S. dollars with foreign currencies was $2.4 billion and $1.0 billion at
December 31, 2009 and 2010. The notional principal of foreign exchange contracts to sell U.S. dollars for foreign
currencies was $115 million and $84 million at December 31, 2009 and 2010. The notional principal of foreign
exchange contracts to purchase Euros with other currencies was €618 million (or approximately $889 million) and
€991 million (or approximately $1.3 billion) at December 31, 2009 and 2010. The notional principal of foreign
exchange contracts to sell Euros for other foreign currencies was €8 million (or approximately $11 million) and
€6 million (or approximately $8 million) at December 31, 2009 and 2010.
The fair value of our outstanding derivative instruments at December 31, 2009 and 2010 is summarized
below (in millions):
Balance Sheet Location
Fair Value of Derivative Instruments
As of December 31,
2009 As of December 31,
2010
Derivative Assets
Derivatives designated as hedging instruments:
Foreign exchange option contracts ........... Prepaid revenue
share, expenses and
other assets, current
and non-current $104 $330
Foreign exchange forward contracts .......... Prepaid revenue
share, expenses and
other assets, current 1 12
Total .......................................... $105 $342
Derivative Liabilities
Derivatives designated as hedging instruments:
Foreign exchange forward contracts .......... Accrued expenses
and other current
liabilities $ 0 $ 5
Derivatives not designated as hedging instruments:
Foreign exchange forward contracts .......... Accrued expenses
and other current
liabilities 0 3
Total .......................................... $ 0 $ 8
The effect of derivative instruments in cash flow hedging relationship on income and other comprehensive
income for the years ended December 31, 2008, 2009, and 2010 is summarized below (in millions):
Increase (Decrease) in Gains Recognized in AOCI
on Derivatives Before Tax Effect (Effective Portion)
Year Ended December 31,
Derivatives in Cash Flow Hedging Relationship 2008 2009 2010
Foreign exchange option contracts ............................ $522 $(14) $331
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