MasterCard 2010 Annual Report Download - page 83

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were no material changes in our market risk exposures at December 31, 2010 as compared to December 31,
2009. The Wall Street Reform and Consumer Protection Act includes provisions related to derivative financial
instruments and the Company is determining what impact, if any, such provisions will have on the Company’s
financial position or results of operations.
Foreign Exchange Risk
We enter into forward contracts to manage foreign exchange risk associated with anticipated receipts and
disbursements which are either transacted in a non-functional currency or valued based on a currency other than
our functional currencies. We also enter into forward contracts to offset possible changes in value due to foreign
exchange fluctuations of assets and liabilities denominated in foreign currencies. The objective of this activity is
to reduce our exposure to transaction gains and losses resulting from fluctuations of foreign currencies against
our functional currencies, principally the U.S. dollar and euro. The terms of the forward contracts are generally
less than 18 months.
The table below shows a summary of derivative contracts classified by functional currency:
U.S. Dollar Functional Currency
(in millions) December 31, 2010 December 31, 2009
Notional
Estimated
Fair Value Notional
Estimated
Fair Value
Commitments to purchase foreign currency ..................... $ 36 $1 $38 $—
Commitments to sell foreign currency .......................... 129 (2) 50 (1)
Euro Functional Currency
(in millions) December 31, 2010 December 31, 2009
Notional
Estimated
Fair Value Notional
Estimated
Fair Value
Commitments to purchase foreign currency ..................... $ 2 $— $16 $—
Commitments to sell foreign currency .......................... 14 — 45 —
U.K. Pound Sterling Functional Currency
(in millions) December 31, 2010 December 31, 2009
Notional
Estimated
Fair Value Notional
Estimated
Fair Value
Commitments to purchase foreign currency ..................... $— $— $— $—
Commitments to sell foreign currency .......................... 5 — — —
Our settlement activities are subject to foreign exchange risk resulting from foreign exchange rate
fluctuations. This risk is limited to the typical one business day timeframe between setting the foreign exchange
rates and clearing the financial transactions and by confining the supported settlement currencies to the U.S.
dollar or one of 16 other transaction currencies. The remaining 134 transaction currencies are settled in one of the
supported settlement currencies or require local settlement netting arrangements that minimize our foreign
exchange exposure.
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