HP 2011 Annual Report Download - page 119
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HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
Note 10: Financial Instruments (Continued)
Fair Value of Derivative Instruments in the Consolidated Balance Sheets
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 Sheets was
recorded as follows:
As of October 31, 2011 As of October 31, 2010
Long-term Long-term
Financing Financing
Other Receivables Other Other Receivables Other
Gross Current and Accrued Other Gross Current and Accrued Other
Notional(1) Assets Other Assets Liabilities Liabilities Notional(1) Assets Other Assets Liabilities Liabilities
In millions
Derivatives designated as
hedging instruments
Fair value hedges:
Interest rate contracts . . . $10,075 $ 30 $508 $ — $ — $ 8,575 $ — $656 $ — $ —
Cash flow hedges:
Foreign exchange contracts 21,666 192 30 324 126 16,862 98 20 503 83
Net investment hedges:
Foreign exchange contracts 1,556 7 4 44 56 1,466 8 2 58 62
Total derivatives designated as
hedging instruments ..... 33,297 229 542 368 182 26,903 106 678 561 145
Derivatives not designated as
hedging instruments
Foreign exchange contracts . . 13,994 66 5 244 38 13,701 51 3 129 55
Interest rate contracts(2) .... 2,200 — 55 — 71 2,200 — 79 — 89
Other derivatives ........ 410 25 6 — 1 397 5 6 — —
Total derivatives not
designated as hedging
instruments .......... 16,604 91 66 244 110 16,298 56 88 129 144
Total derivatives ........ $49,901 $320 $608 $612 $292 $43,201 $162 $766 $690 $289
(1) Represents the face amounts of contracts that were outstanding as of October 31, 2011 and October 31, 2010, respectively.
(2) Represents offsetting swaps acquired through previous business combinations that were not designated as hedging instruments.
Effect of Derivative Instruments on the Consolidated Statements of Earnings
The before-tax effect of a derivative instrument and related hedged item in a fair value hedging
relationship for fiscal years ended October 31, 2011 and October 31, 2010 was as follows:
Gain (Loss) Recognized in Income on Derivative and Related Hedged Item
Derivative Instrument Location 2011 Hedged Item Location 2011
In millions In millions
Interest rate contracts Interest and other, net $(119) Fixed-rate debt Interest and other, net $128
Gain (Loss) Recognized in Income on Derivative and Related Hedged Item
Derivative Instrument Location 2010 Hedged Item Location 2010
In millions In millions
Interest rate contracts Interest and other, net $316 Fixed-rate debt Interest and other, net $(299)
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