HP 2015 Annual Report Download - page 157
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Table of Contents
HP uses forward contracts designated as net investment hedges to hedge net investments in certain foreign subsidiaries whose functional currency is the
local currency. HP records the effective portion of such derivative instruments together with changes in the fair value of the hedged items in Cumulative
translation adjustment as a separate component of stockholders' equity in the Consolidated Balance Sheets.
Other derivatives not designated as hedging instruments consist primarily of forward contracts used to hedge foreign currency-denominated balance
sheet exposures. HP also uses total return swaps and, to a lesser extent, interest rate swaps, based on equity or fixed income indices, to hedge its executive
deferred compensation plan liability.
For derivative instruments not designated as hedging instruments, HP recognizes changes in fair value of the derivative instrument, as well as the
offsetting change in the fair value of the hedged item, in Interest and other, net in the Consolidated Statements of Earnings in the period of change.
For interest rate swaps designated as fair value hedges, HP measures hedge effectiveness by offsetting the change in fair value of the hedged item with the
change in fair value of the derivative. For foreign currency options and forward contracts designated as cash flow or net investment hedges, HP measures
hedge effectiveness by comparing the cumulative change in fair value of the hedge contract with the cumulative change in fair value of the hedged item,
both of which are based on forward rates. HP recognizes any ineffective portion of the hedge in the Consolidated Statements of Earnings in the same period in
which ineffectiveness occurs. Amounts excluded from the assessment of effectiveness are recognized in the Consolidated Statements of Earnings in the
period they arise.
155
Source: HP INC, 10-K, December 16, 2015 Powered by Morningstar® Document Research℠
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