Honeywell 2009 Annual Report Download - page 108

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HONEYWELL INTERNATIONAL INC.
NOTES TO FINANCIAL STATEMENTS—(Continued)
(Dollars in millions, except per share amounts)
The derivatives utilized for risk management purposes as detailed above are included on the Consolidated
Balance Sheet and impacted the Statement of Operations as follows:
Fair value of asset derivatives consist of the following:
Designated as a Hedge Balance Sheet Location December 31,
2009 2008
Foreign currency exchange contracts Accounts, notes and other receivables $ 8 $ 2
Interest rate swap agreements Other assets 1 —
Commodity contracts Accounts, notes and other receivables 4 —
Not Designated as a Hedge Balance Sheet Location
Foreign currency exchange contracts Accounts notes and other receivables $ 3 $ 5
Fair value of liability derivatives consist of the following:
Designated as a Hedge Balance Sheet Location December 31,
2009 2008
Foreign currency exchange contracts Accrued liabilities $ 1 $ 19
Interest rate swap agreements Accrued liabilities 3 —
Commodity contracts Accrued liabilities — 4
Not Designated as a Hedge Balance Sheet Location
Foreign currency exchange contracts Accrued liabilities $ 3 $ 14
Gains (losses) recognized in OCI consist of the following:
Designated as a Cash Flow Hedge December 31,
2009
Foreign currency exchange contracts $ 18
Commodity contracts (1)
Gains (losses) reclassified from AOCI to income (Effective Portions) consist of the following:
Designated as a Cash Flow Hedge Income Statement Location December 31,
2009
Foreign currency exchange contracts Product sales $ 54
Cost of products sold (44)
Selling general and administrative (1)
Commodity contracts Cost of products sold (7)
Ineffective portions of commodity derivative instruments designated in cash flow hedge relationships were
less than $1 million in 2009 and are located in cost of products sold. Foreign currency exchange contracts in
cash flow hedge relationships qualify as critical matched terms hedge relationships and as a result have no
ineffectiveness.
Interest rate swap agreements are designated as hedge relationships with gains or (losses) on the derivative
recognized in Interest and other financial charges offsetting the gains and losses on the underlying debt being
hedged. Losses on interest rate swap agreements recognized in earnings were $2 million in 2009. These losses
were fully off-set by gains on the underlying debt being hedged.
We also economically hedge our exposure to changes in foreign exchange rates principally with forward
contracts. These contracts are marked-to-market with the resulting gains and losses similarly recognized in
earnings offsetting the gains and losses on the non-functional currency denominated monetary assets and
liabilities being hedged. For the year ended December 31, 2009, we recognized $85 million of expense in Other
(income) expense.
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