HP 2009 Annual Report Download - page 126
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HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
Note 10: Financial Instruments (Continued)
the hedged item, both of which are based on forward rates. HP recognizes any ineffective portion of
the hedge, as well as amounts not included in the assessment of effectiveness, in the Consolidated
Statements of Earnings. As of October 31, 2009, the portion of hedging instruments’ gain or loss
excluded from the assessment of effectiveness was not material for fair value, cash flow or net
investment hedges. Hedge ineffectiveness for fair value, cash flow and net investment hedges was not
material in fiscal years 2009, 2008 and 2007.
Fair Value of Derivative Instruments in the Consolidated Balance Sheet
As discussed in Note 9, HP estimates the fair values of derivatives primarily based on pricing
models using current market rates and records all derivatives on the balance sheet at fair value. The
gross notional and fair value of derivative financial instruments in the Consolidated Balance Sheet as of
October 31, 2009 were as follows:
As of October 31, 2009
Long-term
Financing
Other Receivables Other
Gross Current and Accrued Other
Notional(1) Assets Other Assets Liabilities Liabilities
In millions
Derivatives designated as hedging instruments
Fair value hedges:
Interest rate contracts .................. $ 7,575 $ — $346 $ — $ 5
Cash flow hedges:
Foreign exchange contracts .............. 15,056 116 12 389 33
Net investment hedges:
Foreign exchange contracts .............. 1,350 13 12 47 39
Total derivatives designated as hedging
instruments ......................... $23,981 $129 $370 $436 $ 77
Derivatives not designated as hedging
instruments
Foreign exchange contracts ................ $16,104 $206 $ 20 $163 $ 51
Interest rate contracts(2) .................. 2,211 — 29 — 45
Total return contracts .................... 268 2 — 2 —
Total derivatives not designated as hedging
instruments ......................... $18,583 $208 $ 49 $165 $ 96
Total derivatives ........................ $42,564 $337 $419 $601 $173
(1) Represents the face amounts of contracts that were outstanding as of October 31, 2009.
(2) Represents offsetting swaps acquired through previous business combination that were not
designated as hedging instruments.
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