Medtronic 2009 Annual Report Download - page 60

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56 Medtronic, Inc.
Notes to Consolidated Financial Statements
(continued)
Foreign Currency Translation Assets and liabilities are translated
to U.S. dollars at period-end exchange rates, and the resulting
gains and losses arising from the translation of net assets located
outside the U.S. are recorded as a cumulative translation
adjustment, a component of accumulated other comprehensive
(loss)/income on the consolidated balance sheets. Elements of the
consolidated statements of earnings are translated at average
exchange rates in effect during the period and foreign currency
transaction gains and losses are included in other expense, net in
the consolidated statements of earnings.
Comprehensive Income and Accumulated Other Comprehensive
(Loss)/Income In addition to net earnings, comprehensive income
includes changes in foreign currency translation adjustments
(including the change in current exchange rates, or spot rates, of
net investment hedges), unrealized gains and losses on foreign
exchange derivative contracts qualifying and designated as cash
flow hedges, net changes in retirement obligation funded status
and unrealized gains and losses on AFS marketable securities.
Comprehensive income in fiscal years 2009, 2008 and 2007 was
$2.252 billion, $2.024 billion and $2.794 billion, respectively.
Presented below is a summary of activity for each component of accumulated other comprehensive (loss)/income for fiscal years
2009, 2008 and 2007:
(in millions)
Unrealized Gain/
(Loss) on
Investments
Cumulative
Translation
Adjustments
Net Change
in Retirement
Obligations
Unrealized Gain/
(Loss) on Foreign
Exchange
Derivatives
Accumulated
Other
Comprehensive
Income/(Loss)
Balance April 28, 2006 $ (14) $ 177 $ (24) $ 15 $ 155
Other comprehensive (loss)/income 20 18 24 (70) (8)
Adoption of SFAS No. 158 — — (209) — (209)
Balance April 27, 2007 $ 6 $ 195 $ (209) $ (55) $ (62)
Other comprehensive (loss)/income (47) 14 37 (211) (207)
Adjustment to deferred tax benefit recorded on
adoption of SFAS No. 158 — — (17) — (17)
Balance April 25, 2008 $ (41) $ 209 $ (189) $(266) $ (286)
Other comprehensive (loss)/income (54) (147) (210) 494 83
Adjustment for change in plan measurement date
pursuant to SFAS No. 158 — — 1 — 1
Bal an ce Apr il 24 , 2 00 9 $(95) $ 62 $(398) $ 228 $(202)
Translation adjustments are not adjusted for income taxes as
substantially all translation adjustments relate to permanent
investments in non-U.S. subsidiaries. The tax expense/(benefit)
on the unrealized gain/(loss) on foreign exchange derivatives in
fiscal years 2009, 2008 and 2007 was $320 million, $(132) million
and $(38) million, respectively. The minimum pension liability
was eliminated at the end of fiscal year 2007 as a result of the
Company’s adoption of SFAS No. 158, “Employers’ Accounting for
Defined Benefit Pension and Other Postretirement Plans—an
amendment of FASB Statements No. 87, 88, 106 and 132(R)” (SFAS
No. 158). The tax benefit related to SFAS No. 158 was $109 million,
$17 million and $92 million in fiscal years 2009, 2008 and 2007,
respectively. The Company adopted the new measurement date
provisions of SFAS No. 158 in the fourth quarter of fiscal year 2009
which resulted in a one-time adjustment to retained earnings and
accumulated other comprehensive income in that period. The tax
expense on the adjustment to other comprehensive income for
the change in measurement date was less than $1 million. The tax
expense/(benefit) on the unrealized gain/(loss) on investments in
fiscal years 2009, 2008 and 2007 was $(33) million, $(26) million
and $11 million, respectively.
Derivatives SFAS No. 133, “Accounting for Derivative Instruments
and Hedging Activities,” (SFAS No. 133) as amended, requires
companies to recognize all derivatives as assets and liabilities
on the balance sheet and to measure the instruments at fair
value through earnings unless the derivative qualifies as a hedge.
If the derivative is a hedge, depending on the nature of the
hedge and hedge effectiveness, changes in the fair value of the
derivative will either be recorded currently through earnings
or recognized in accumulated other comprehensive (loss)/income
on the consolidated balance sheets until the hedged item is
recognized in earnings upon settlement/termination. The changes
in the fair value of the derivative will offset the change in fair
value of the hedged asset, liability, net investment or probable
commitment. The Company evaluates hedge effectiveness at