Kraft 2010 Annual Report Download - page 90
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Note 12. Financial Instruments:
Fair Value of Derivative Instruments:
The fair values of derivative instruments recorded in the consolidated balance sheet as of December 31, 2010 and 2009 were:
December 31, 2010 December 31, 2009
Asset
Derivatives
Liability
Derivatives
Asset
Derivatives
Liability
Derivatives
(in millions)
Derivatives designated
as
hedging instruments:
Foreign exchange contracts $ 24 $ 115 $ 8 $ 158
Commodity contracts 74 5 25 14
Interest rate contracts 58 13 153 -
$ 156 $ 133 $ 186 $ 172
Derivatives not
designated
as hedging instruments:
Foreign exchange contracts $ 21 $ 48 $ 2 $ -
Commodity contracts 202 114 71 62
Interest rate contracts 59 21 - -
$ 282 $ 183 $ 73 $ 62
Total fair value $ 438 $ 316 $ 259 $ 234
The majority of the increase in derivatives not designated as hedging instruments was a result of the Cadbury acquisition as we did not re-designate them
for hedge accounting. We include the fair value of our asset derivatives within other current assets and the fair value of our liability derivatives within other
current liabilities.
The fair values (asset / (liability)) of our derivative instruments at December 31, 2010 were determined using:
Total
Fair Value
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
Significant
Other Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
(in millions)
Foreign exchange contracts $ (118) $ - $ (118) $ -
Commodity contracts 157 129 28 -
Interest rate contracts 83 - 83 -
Total derivatives $ 122 $ 129 $ (7) $ -
The fair values (asset / (liability)) of our derivative instruments at December 31, 2009 were determined using:
Total
Fair Value
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
Significant
Other Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
(in millions)
Foreign exchange contracts $ (148) $ - $ (148) $ -
Commodity contracts 20 11 8 1
Interest rate contracts 153 - 153 -
Total derivatives $ 25 $ 11 $ 13 $ 1
Level 2 financial assets and liabilities consist of commodity forwards; foreign exchange forwards, currency swaps, and options; and interest rate swaps.
Commodity derivatives are valued using an income approach based on the observable market commodity index prices less the contract rate multiplied by the
notional amount. Foreign currency contracts are valued using an income approach based on observable market forward rates less the contract rate multiplied
by the notional amount.
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