Kraft 2010 Annual Report Download - page 92

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Hedge Coverage:
As of December 31, 2010, we had hedged forecasted transactions for the following durations:
• commodity transactions for periods not exceeding the next 17 months;
• interest rate transactions for periods not exceeding the next 32 years and 4 months; and
• foreign currency transactions for periods not exceeding the next 13 months.
Fair Value Hedges:
The effect of fair value hedges for the years ended December 31, 2010 and 2009 was:
2010 2009
Gain / (Loss)
Recognized
in Income on
Derivatives
Gain / (Loss)
Recognized
in Income on
Borrowings
Gain / (Loss)
Recognized
in Income on
Derivatives
Gain / (Loss)
Recognized
in Income on
Borrowings
(in millions) (in millions)
Interest rate contracts $ 1 $ (1) $ 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 years ended December 31, 2010 and 2009 was:
2010 2009
Gain / (Loss)
Recognized
in OCI
Location of
Gain / (Loss)
Recorded
in AOCI
Gain / (Loss)
Recognized
in OCI
Location of
Gain / (Loss)
Recorded
in AOCI
(in millions) (in millions)
Euro notes $ 170 Currency Translation $ (65) Currency Translation
Pound sterling notes 7 Adjustment - Adjustment
Economic Hedges:
The effect of economic hedges, derivatives that are not designated as hedging instruments, for the years ended December 31, 2010 and 2009 was:
2010 2009 Location of
Gain / (Loss)
Recognized
in Earnings
Gain / (Loss)
Recognized
in Earnings
Gain / (Loss)
Recognized
in Earnings
(in millions)
Foreign exchange contracts:
Intercompany loans and forecasted interest
payments $ 28 $ (10) Interest expense
Forecasted transactions (11) (10) Cost of sales
Forecasted transactions (17) - Interest expense
Cadbury acquisition related (395) - Interest expense
Interest rate contracts 4 - Interest expense
Commodity contracts 126 37 Cost of sales
Total $ (265) $ 17
The hedging losses related to the Cadbury acquisition were economically offset by foreign exchange movement net gains of $240 million on the pound
sterling cash, Cadbury Bridge Facility and payable balances associated with the acquisition. For commodity contracts not designated as hedging instruments,
the impact to earnings was insignificant in 2008. For foreign exchange contracts not designated as hedging instruments, we recognized net losses of $50
million in 2008. The majority of these losses were attributable to hedges of intercompany loans and were economically offset with foreign currency gains
from the intercompany receivable.
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