IBM 2013 Annual Report Download - page 107

Download and view the complete annual report

Please find page 107 of the 2013 IBM annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 154

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146
  • 147
  • 148
  • 149
  • 150
  • 151
  • 152
  • 153
  • 154

Notes to Consolidated Financial Statements
International Business Machines Corporation and Subsidiary Companies
106
The Effect of Derivative Instruments in the Consolidated Statement of Earnings
($ in millions)
Gain/(Loss) Recognized in Earnings
Consolidated
Statement of
Earnings
Line Item Recognized on Derivatives(1) Attributable to Risk Being Hedged(2)
For the year ended December 31: 2013 2012 2011 2013 2012 2011
Derivative instruments in fair value hedges
Interest rate contracts Cost of financing $(109) $ 65 $ 271 $202 $ 59 $(117)
Interest expense (74) 55 205 138 50 (89)
Derivative instruments not designated
as hedging instruments (1)
Foreign exchange contracts
Other (income)
and expense (328) (311) 352 N/A N/A N/A
Equity contracts SG&A expense 164 110 42 N/A N/A N/A
Warrants
Other (income)
and expense —— 10 N/A N/A N/A
To t a l $(347) $ (81) $ 880 $340 $108 $(206)
($ in millions)
Gain/(Loss) Recognized in Earnings and Other Comprehensive Income
Effective Portion Recognized in OCI
Consolidated
Statement of
Earnings
Line Item
Effective Portion
Reclassified from AOCI
Ineffectiveness and Amounts
Excluded from Effectiveness Testing(3)
For the year ended December 31: 2013 2012 2011 2013 2012 2011 2013 2012 2011
Derivative instruments in cash flow hedges
Interest rate contracts $ — $ — $ — Interest expense $ — $ (6) $ (8) $— $ — $ —
Foreign exchange contracts 43 32 (266)
Other (income)
and expense 162 237 (247) (0) 3 (3)
Cost of sales (34) 7 (182) —— —
SG&A expense 39 16 (74) —— —
Instruments in net investment hedges(4)
Foreign exchange contracts 173 (26) 45 Interest expense —— 0 311 (9)
To t a l $216 $ 6 $(221) $167 $253 $(511) $ 3 $14 $(12)
(1) The amount includes changes in clean fair values of the derivative instruments in fair value hedging relationships and the periodic accrual for coupon payments required under
these derivative contracts.
(2) The amount includes basis adjustments to the carrying value of the hedged item recorded during the period and amortization of basis adjustments recorded on de-designated
hedging relationships during the period.
(3) The amount of gain/(loss) recognized in income represents ineffectiveness on hedge relationships.
(4) Instruments in net investment hedges include derivative and non-derivative instruments.
N/A—Not applicable
For the 12 months ending December 31, 2013, 2012 and 2011, there
were no significant gains or losses recognized in earnings represent-
ing hedge ineffectiveness or excluded from the assessment of
hedge effectiveness (for fair value hedges), or associated with an
underlying exposure that did not or was not expected to occur (for
cash flow hedges); nor are there any anticipated in the normal
course of business.
Refer to note A, “Significant Accounting Policies,” on pages 90
and 91 for additional information on the company’s use of derivative
financial instruments.