Lexmark 2011 Annual Report Download - page 135

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Net outstanding notional amount of derivative activity as of December 31, 2011 and 2010 is as follows.
This activity was driven by fair value hedges of recognized assets and liabilities primarily denominated
in the currencies below.
Long (Short) Positions by Currency (in USD) December 31, 2011
EUR .................................................................. $54.4
CAD .................................................................. 38.3
CHF .................................................................. (28.2)
Other, net .............................................................. (17.5)
Total .................................................................. $47.0
Long (Short) Positions by Currency (in USD) December 31, 2010
EUR .................................................................. $ (82.7)
CHF .................................................................. (31.8)
JPY................................................................... (19.5)
Other, net .............................................................. (14.5)
Total .................................................................. $(148.5)
Accounting for Derivatives and Hedging Activities
All derivatives are recognized in the Consolidated Statements of Financial Position at their fair value.
Fair values for Lexmark’s derivative financial instruments are based on pricing models or formulas
using current market data, or where applicable, quoted market prices. On the date the derivative
contract is entered into, the Company designates the derivative as a fair value hedge. Changes in the
fair value of a derivative that is highly effective as — and that is designated and qualifies as — a fair
value hedge, along with the loss or gain on the hedged asset or liability are recorded in current period
earnings in Cost of revenue or Other (income) expense, net on the Consolidated Statements of
Earnings. Derivatives qualifying as hedges are included in the same section of the Consolidated
Statements of Cash Flows as the underlying assets and liabilities being hedged.
As of December 31, 2011 and 2010, the Company had the following net derivative assets (liabilities)
recorded at fair value in Prepaid expenses and other current assets (Accrued liabilities) on the
Consolidated Statements of Financial Position:
Net Asset
Position
Net (Liability)
Position
Foreign Exchange Contracts 2011 2010 2011 2010
Gross liability position ............................................ $(0.2) $(0.8) $(1.2) $—
Gross asset position ............................................. 0.3 5.0 0.2 —
Net asset (liability) position ....................................... $0.1 $4.2 $(1.0) $—
The Company had the following (gains) and losses related to derivative instruments qualifying and
designated as hedging instruments in fair value hedges and related hedged items recorded on the
Consolidated Statements of Earnings:
Recorded in
Cost of revenue
Recorded in
Other (income)
expense, net
Fair Value Hedging Relationships 2011 2010 2009 2011 2010 2009
Foreign Exchange Contracts ......................... $0.1 $11.6 $ 3.6 $(1.5) $ 1.4 $(0.4)
Underlying ........................................ 6.2 (5.1) (5.7) (0.5) (3.8) (2.2)
Total ............................................ $6.3 $ 6.5 $(2.1) $(2.0) $(2.4) $(2.6)
Lexmark formally documents all relationships between hedging instruments and hedged items, as well
as its risk management objective and strategy for undertaking various hedge items. This process
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