Google 2010 Annual Report Download - page 79

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Gains Reclassified from AOCI into Income (Effective Portion)
Year Ended December 31,
Derivatives in Cash Flow Hedging Relationship Location 2008 2009 2010
Foreign exchange option contracts ................... Revenues $168 $325 $203
Gains (Losses) Recognized in Income on Derivatives (Amount
Excluded from Effectiveness Testing and Ineffective Portion)(1)
Year Ended December 31,
Derivatives in Cash Flow Hedging Relationship Location 2008 2009 2010
Foreign exchange option contracts ................. Interest and
other income, net $(136) $(268) $(320)
1Gains (losses) related to the ineffective portion of the hedges were not material in all periods presented.
The effect of derivative instruments in fair value hedging relationship on income for the years ended
December 31, 2009 and 2010 is summarized below (in millions):
Gains (Losses) Recognized in Income on Derivatives(2)
Year Ended December 31,
Derivatives in Fair Value Hedging Relationship Location 2009 2010
Foreign exchange forward contracts ............................. Interest and
other income, net $ 2 $(35)
Hedged item .................................................. Interest and
other income, net (2) 29
Total ......................................................... $0 $ (6)
2Losses related to the amount excluded from effectiveness testing of the hedges were none and $6 million for
the years ended December 31, 2009 and 2010.
The effect of derivative instruments not designated as hedging instruments on income for the years ended
December 31, 2008, 2009, and 2010 is summarized below (in millions):
Gains (Losses) Recognized in Income on Derivatives
Year Ended December 31,
Derivatives Not Designated As Hedging Instruments Location 2008 2009 2010
Foreign exchange forward contracts .................... Interest and
other income, net $145 $(78) $(40)
Note 6. Fair Value Measurements
We measure our cash equivalents, marketable securities, foreign currency derivative contracts, and ARS at
fair value. Fair value is an exit price, representing the amount that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based
measurement that should be determined based on assumptions that market participants would use in pricing an
asset or a liability. A three-tier fair value hierarchy is established as a basis for considering such assumptions and
for inputs used in the valuation methodologies in measuring fair value:
Level 1—Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active
markets.
Level 2—Include other inputs that are directly or indirectly observable in the marketplace.
Level 3—Unobservable inputs that are supported by little or no market activities.
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