Honeywell 2012 Annual Report Download - page 97

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the assumptions market participants would use in valuing the asset. Examples of utilized unobservable
inputs are future cash flows, long term growth rates and applicable discount rates.
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 derivatives classified as assets consist of the following:
Designated as a Hedge Balance Sheet Classification 2012 2011
December 31,
Foreign currency exchange contracts . . . . . . Accounts, notes, and other receivables. . . . . $ 37 $ 18
Interest rate swap agreements. . . . . . . . . . . . . Other assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 146 134
Forward commodity contracts. . . . . . . . . . . . . . Accounts, notes, and other receivables. . . . . 1 1
Not Designated as a Hedge Balance Sheet Classification 2012 2011
December 31,
Foreign currency exchange contracts. . . . . . . Accounts, notes, and other receivables. . . . . $ 15 $ 8
Fair value of derivatives classified as liabilities consist of the following:
Designated as a Hedge Balance Sheet Classification 2012 2011
December 31,
Foreign currency exchange contracts . . . . . . Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . $ 29 $ 50
Forward commodity contracts. . . . . . . . . . . . . . Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . 1 10
Not Designated as a Hedge Balance Sheet Classification 2012 2011
December 31,
Foreign currency exchange contracts. . . . . . . Accrued liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . $ 3 $ 2
Gains (losses) recognized in other comprehensive income (effective portions) consist of the following:
Designated Cash Flow Hedge 2012 2011
Years Ended
December 31,
Foreign currency exchange contracts. . $31 $(42)
Forward commodity contracts . . . . . . . . . (8) (12)
Gains (losses) reclassified from AOCI to income consist of the following:
Designated Cash Flow Hedge Income Statement Location 2012 2011
Years Ended
December 31,
Foreign currency exchange contracts . . . . . . . . . Product sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (7) $ 29
Cost of products sold . . . . . . . . . . . . . . . . . . . . . . . . 23 (34)
Sales & general administrative . . . . . . . . . . . . . . . (12) (8)
Forward commodity contracts . . . . . . . . . . . . . . . . Cost of products sold . . . . . . . . . . . . . . . . . . . . . . . . $(17) $ (2)
Ineffective portions of commodity derivative instruments designated in cash flow hedge
relationships were insignificant in the years ended December 31, 2012 and 2011 and are classified
within 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. Gains on interest rate swap agreements recognized in earnings were
$12 and $112 million in the years ended December 31, 2012 and 2011 respectively. Gains and losses
are fully offset by losses and gains on the underlying debt being hedged.
88
HONEYWELL INTERNATIONAL INC.
NOTES TO FINANCIAL STATEMENTS—(Continued)
(Dollars in millions, except per share amounts)