Kraft 2009 Annual Report Download - page 226

We record (i) the gain or loss reclassified from accumulated other comprehensive earnings / (losses) into earnings, (ii) the
gain or loss on ineffectiveness, and (iii) the gain or loss on the amount excluded from effectiveness testing in:
• cost of sales for commodity contracts;
• cost of sales or marketing, administration and research costs for foreign exchange contracts related to forecasted
transactions, depending on the type of transaction; and
• interest and other expense, net for interest rate contracts and foreign exchange contracts related to intercompany
loans.
As of December 31, 2009, we expected to transfer unrealized losses of $2 million (net of taxes) for commodity cash flow
hedges and unrealized gains of $5 million (net of taxes) for foreign currency cash flow hedges to earnings during the next
12 months.
Hedge Coverage:
As of December 31, 2009, we had hedged forecasted transactions for the following durations:
• commodity transactions for periods not exceeding the next 19 months;
• interest rate transactions for periods not exceeding the next 33 years and 1 month; and
• foreign currency transactions for periods not exceeding the next 24 months, and excluding intercompany loans,
we had hedged forecasted foreign currency transactions for periods not exceeding the next 12 months.
Fair Value Hedges:
The effect of fair value hedges for the year ended December 31, 2009 was:
Gain / (Loss)
Recognized
in Income on
Derivatives
Gain / (Loss)
Recognized
in Income on
Borrowings
(in millions)
Interest rate contracts $ 7 $ (7)
We include the gain or loss on hedged long-term debt and the offsetting loss or gain on the related interest rate swap in
interest and other expense, net.
Hedges of Net Investments in Foreign Operations:
The effect of hedges of net investments in foreign operations for the year ended December 31, 2009 was:
Gain / (Loss)
Recognized in
OCI
Location of
Gain / (Loss)
Recorded in
AOCI
(in millions)
Euro notes $ (65)
Currency Translation
Adjustment
Our currency translation adjustment included gains of $83 million for the year ended December 31, 2008 and $28 million for
the year ended December 31, 2007 related to the euro denominated borrowings.
Economic Hedges:
The effect of economic hedges, derivatives that are not designated as hedging instruments, for the year ended
December 31, 2009 was:
Gain / (Loss)
Recognized in
Earnings
Location of
Gain / (Loss)
Recognized
in Earnings
(in millions)
Foreign exchange contracts -
intercompany
loans and forecasted interest payments $ (10) Interest expense
Foreign exchange contracts - forecasted
transactions (10) Cost of sales
Commodity contracts 37 Cost of sales
Total $ 17
For commodity contracts not designated as hedging instruments, the impact to earnings was insignificant in 2008, and we
recognized net gains of $56 million in 2007. For foreign exchange contracts not designated as hedging instruments, we
Source: KRAFT FOODS INC, 10-K, February 25, 2010 Powered by Morningstar® Document Research℠