Kimberly-Clark 2015 Annual Report Download - page 33

As of December 31, 2015 , a 10 percent unfavorable change in the exchange rate of the U.S. dollar against the prevailing market rates of foreign currencies
involvingbalancesheettransactionalexposureswouldnotbematerialtoourconsolidatedfinancialposition,resultsofoperationsorcashflows.Thishypothetical
lossontransactionalexposuresisbasedonthedifferencebetweentheDecember31,2015ratesandtheassumedrates.
Thetranslationofthebalancesheetsofnon-U.S.operationsfromlocalcurrenciesintoU.S.dollarsisalsosensitivetochangesinforeigncurrencyexchangerates.
Consequently,an annualtest isperformedto determineif changesincurrencyexchangerateswouldhave asignificant effectonthe translationof thebalance
sheetsofnon-U.S.operationsintoU.S.dollars.Thesetranslationgainsorlossesarerecordedasunrealizedtranslationadjustments("UTA")withinstockholders'
equity.ThehypotheticalchangeinUTAiscalculatedbymultiplyingthenetassetsofthesenon-U.S.operationsbya10percentchangeinthecurrencyexchange
rates.AsofDecember31,2015,a10percentunfavorablechangeintheexchangerateoftheU.S.dollaragainsttheprevailingmarketratesofourforeigncurrency
translation exposures would have reduced stockholders' equity by approximately $700 . These hypothetical adjustments in UTA are based on the difference
betweentheDecember31, 2015exchangerates andthe assumedrates. Intheview ofmanagement, theaboveUTAadjustmentsresulting fromthese assumed
changesinforeigncurrencyexchangeratesarenotmaterialtoourconsolidatedfinancialpositionbecausetheywouldnotaffectourcashflow.
Interest Rate Risk
Interestrateriskismanagedthroughthemaintenanceofaportfolioofvariable-andfixed-ratedebtcomposedofshort-andlong-terminstruments.Theobjectiveis
to maintain a cost-effective mix that management deems appropriate. At December 31, 2015 , the debt portfolio was composed of approximately 29percent
variable-ratedebtand71percentfixed-ratedebt.
Two separate tests are performed to determine whether changes in interest rates would have a significant effect on our financial position or future results of
operations.Bothtestsarebasedonconsolidateddebtlevelsatthe timeofthetest.Thefirst testestimatestheeffectof interestratechangesonfixed-rate debt.
Interestratechangeswouldresultinincreasesordecreasesinthemarketvalueoffixed-ratedebtduetodifferencesbetweenthecurrentmarketinterestratesand
the rates governing these instruments. With respect to fixed-rate debt outstanding at December 31, 2015 , a 10 percent decrease in interest rates would have
increasedthefairvalueoffixed-ratedebtbyabout$186,whichwouldnothaveasignificantimpactonourfinancialstatementsaswedonotrecorddebtatfair
value.Thesecondtestestimatesthepotentialeffectonfuturepre-taxincomethatwouldresultfromincreasedinterestratesappliedtoourcurrentlevelofvariable-
ratedebt.Withrespecttovariable-ratedebt,a10percentincreaseininterestrateswouldnothaveamaterialeffectonthefutureresultsofoperationsorcashflows.
Commodity Price Risk
Wearesubjecttocommoditypricerisk,themostsignificantofwhichrelatestothepriceofpulp.Sellingpricesoftissueproductsareinfluenced,inpart,bythe
marketprice forpulp. Aspreviouslydiscussed underItem 1A,"RiskFactors," increasesin pulpprices couldadverselyaffect earningsif sellingprices arenot
adjustedorifsuchadjustmentssignificantlytrailtheincreasesinpulpprices.Derivativeinstrumentshavenotbeenusedtomanagetheserisks.
Our energy, manufacturing and transportation costs are affected by various market factors including the availability of supplies of particular forms of energy,
energy prices and local and national regulatory decisions. As previously discussed under Item 1A, "Risk Factors," there can be no assurance we will be fully
protectedagainstsubstantialchangesinthepriceoravailabilityofenergysources.Inaddition,wearesubjecttopriceriskforutilitiesandmanufacturinginputs,
usedinourmanufacturingoperations.Derivativeinstrumentsareusedinaccordancewithourriskmanagementpolicytohedgealimitedportionofthepricerisk.

29 KIMBERLY-CLARKCORPORATION - 2015 Annual Report