International Paper 2014 Annual Report Download - page 108
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72
During the next 12 months, the amount of the
December 31, 2014 AOCI balance, after tax, that is
expected to be reclassified to earnings is a gain of $3
million.
The amounts of gains and losses recognized in the consolidated statement of operations on qualifying and non-
qualifying financial instruments used in hedging transactions were as follows:
Gain (Loss)
Reclassified from
AOCI
into Income
(Effective Portion)
Location of Gain
(Loss)
Reclassified
from AOCI
into Income
(Effective Portion)
In millions 2014 2013 2012
Derivatives in Cash Flow Hedging Relationships:
Foreign exchange contracts $4$7$
(15) Cost of products sold
Natural gas contracts —— (7) Cost of products sold
Total $ 4 $7$
(22)
Gain (Loss)
Recognized
in Income
Location of Gain
(Loss)
in Consolidated
Statement of
Operations
In millions 2014 2013 2012
Derivatives in Fair Value Hedging Relationships:
Interest rate contracts $1 $ (1) $ — Interest expense, net
Debt (1) 1 — Interest expense, net
Total $— $— $—
Derivatives Not Designated as Hedging Instruments:
Electricity Contracts $(2) $ 4 $ (4) Cost of products sold
Embedded derivatives —(1) (4) Interest expense, net
Foreign exchange contracts (1) (5) — Cost of products sold
Interest rate contracts 12 (a) 21 22 Interest expense, net
Total $9 $19 $14
(a) Excluding gain of $7 million, net related to debt issuance and debt reduction recorded to Restructuring and other charges.
The following activity is related to fully effective interest rate swaps designated as fair value hedges:
2014 2013
In millions Issued Terminated Undesignated Issued Terminated Undesignated
Fourth Quarter $— $— $—$175 $— $—
First Quarter 55 — — —— —
Total $ 55 $— $—$175 $— $—
Fair Value Measurements
International Paper’s financial assets and liabilities that
are recorded at fair value consist of derivative contracts,
including interest rate swaps, foreign currency forward
contracts, and other financial instruments that are used
to hedge exposures to interest rate, commodity and
currency risks. In addition, a consolidated subsidiary of
International Paper has an embedded derivative. For
these financial instruments and the embedded
derivative, fair value is determined at each balance
sheet date using an income approach.
The guidance for fair value measurements and
disclosures sets out a fair value hierarchy that groups
fair value measurement inputs into the following three
classifications:
Level 1: Quoted market prices in active markets for
identical assets or liabilities.
Level 2: Observable market-based inputs other than
quoted prices included within Level 1 that are
observable for the asset or liability, either directly or
indirectly.