HP 2013 Annual Report Download - page 127
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HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
Note 9: Financial Instruments (Continued)
Fair Value of Derivative Instruments in the Consolidated Balance Sheets
As discussed in Note 8, 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
were as follows:
As of October 31, 2013 As of October 31, 2012
Long-Term Long-Term
Financing Financing
Other Receivables Other Long-Term Other Receivables Other Long-Term
Gross Current and Other Accrued Other Gross Current and Other Accrued Other
Notional(1) Assets Assets Liabilities Liabilities Notional(1) Assets Assets Liabilities Liabilities
In millions
Derivatives designated as
hedging instruments
Fair value hedges:
Interest rate contracts .... $11,100 $ 31 $125 $ — $107 $ 7,900 $ 43 $276 $ — $ —
Cash flow hedges:
Foreign exchange contracts . 22,463 79 40 341 80 19,409 160 24 277 79
Net investment hedges:
Foreign exchange contracts . 1,920 30 40 20 12 1,683 14 15 36 24
Total derivatives designated as
hedging instruments ..... 35,483 140 205 361 199 28,992 217 315 313 103
Derivatives not designated as
hedging instruments
Foreign exchange contracts . . 16,048 72 26 76 20 18,687 61 17 51 19
Interest rate contracts(2) .... — — — — — 2,200 25 — 29 —
Other derivatives ........ 344 8 1 — — 383 1 — 3 —
Total derivatives not designated
as hedging instruments .... 16,392 80 27 76 20 21,270 87 17 83 19
Total derivatives ......... $51,875 $220 $232 $437 $219 $50,262 $304 $332 $396 $122
(1) Represents the face amounts of contracts that were outstanding as of October 31, 2013 and October 31, 2012, 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 pre-tax effect of derivative instruments and related hedged items in a fair value hedging
relationship for fiscal years ended October 31, 2013 and October 31, 2012 were as follows:
(Loss) Gain Recognized in Income on Derivative and Related Hedged Item
Derivative Instrument Location 2013 Hedged Item Location 2013
In millions In millions
Interest rate contracts ..... Interest and other, net $(270) Fixed-rate debt Interest and other, net $270
(Loss) Gain Recognized in Income on Derivative and Related Hedged Item
Derivative Instrument Location 2012 Hedged Item Location 2012
In millions In millions
Interest rate contracts ..... Interest and other, net $(130) Fixed-rate debt Interest and other, net $134
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