Google 2012 Annual Report Download - page 48

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42 GOOGLE INC. |Form10-K
PART II
ITEM7A.Quantitative and Qualitative Disclosures About MarketRisk
During the second quarter of 2012, we began to hedge the variability of forecasted interest payments using forward-starting interest
swaps. The total notional amount of these swaps was $1.0billion as of December31,2012, with terms calling for us to receive
interest at a variable rate and to pay interest at a fi xed rate. These forward-starting interest swaps eff ectively fi x the benchmark
interest rate on an anticipated debt issuance of $1.0billion in 2014, and they will be terminated upon issuance of the debt.
When entering into forward-starting interest rate swaps, we are subject to market risk with respect to changes in the underlying
benchmark interest rate that impacts the fair value of the forward-starting interest swaps. We manage market risk by matching
the terms of the swaps with the critical terms of the expected debt issuance.
We considered the historical volatility of short-term interest rates and determined that it was reasonably possible that an adverse
change of 100 basis points could be experienced in the near term. Ahypothetical 1.00% (100 basis points) increase in interest rates
would have resulted in a decrease in the fair values of our marketable securities of approximately $934million and $1.1billion at
December31, 2011 and 2012, after taking into consideration the off setting eff ect from interest rate derivative contracts outstanding
as of December31,2011 and 2012. A hypothetical 1.00% (100 basis points) decrease in interest rates would have resulted in a
decrease in the fair values of our forward-starting interest swaps of approximately $107million at December31, 2012.
Contents
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