Mondelez 2013 Annual Report Download - page 93

Table of Contents
The fair value (asset / (liability)) of our derivative instruments at December 31, 2012 were determined using:
Level 1 financial assets and liabilities consist of exchange-traded commodity futures and listed options. The fair value of these
instruments is determined based on quoted market prices on commodity exchanges. Our exchange-
traded derivatives are generally
subject to master netting arrangements which permit net settlement of transactions with the same counterparty when certain criteria
are met, such as in the event of default. We are also required to maintain cash margin accounts in connection with funding the
settlement of our open positions and the margin requirements generally fluctuate daily based on market conditions. We have
recorded margin deposits related to our exchange-
traded derivatives of $22 million as of December 31, 2013 and $107 million as of
December 31, 2012 within other current assets. Based on our net asset or liability positions with individual counterparties, in the
event of default and immediate net settlement of all of our open positions, as of December 31, 2013, our counterparties would owe
us a total of $7 million, and as of December 31, 2012, all of our net derivative liabilities were fully offset by either our derivative
assets or margin accounts held by counterparties.
Level 2 financial assets and liabilities consist primarily of over-the-counter (“OTC”) foreign exchange forwards, options and swaps;
commodity forwards and options; and interest rate swaps. Our foreign currency contracts are valued using an income approach
based on observable market forward rates less the contract rate multiplied by the notional amount. 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 or based on pricing models that rely on market observable inputs such as commodity prices. Our calculation of the
fair value of interest rate swaps is derived from a discounted cash flow analysis based on the terms of the contract and the
observable market interest rate curve. Our calculation of the fair value of financial instruments takes into consideration the risk of
nonperformance, including counterparty credit risk. Our OTC derivative transactions are governed by International Swap Dealers
Association (“ISDA”) agreements and other standard industry contracts. Under these agreements, we do not post nor require
collateral from our counterparties. Substantially all of our commodity OTC derivatives do not have a legal right of set-off. In
connection with our OTC derivatives that could be net-
settled in the event of default, assuming all parties were to fail to comply with
the terms of the agreements, for derivatives we have in a net liability position, we would owe $47 million as of December 31, 2013
and $88 million as of December 31, 2012, and for derivatives we have in a net asset position, our counterparties would owe us a
total of $349 million as of December 31, 2013 and $114 million as of December 31, 2012. We manage the credit risk in connection
with these and all our derivatives by entering into transactions with counterparties with investment grade credit ratings, limiting the
amount of exposure with each counterparty and monitoring the financial condition of our counterparties.
Derivative Volume:
The net notional values of our derivative instruments as of December 31, 2013 and 2012 were:
86
Quoted Prices in
Active Markets
Significant
Significant
Total
for Identical
Other Observable
Unobservable
Fair Value of Net
Assets
Inputs
Inputs
Asset / (Liability)
(Level 1)
(Level 2)
(Level 3)
(in millions)
Foreign exchange contracts
$
(21
)
$
–
$
(
21
)
$
–
Commodity contracts
(28
)
(53
)
25
–
Interest rate contracts
48
–
48
–
Total derivatives
$
(1
)
$
(53
)
$
52
$
–
Notional Amount
2013
2012
(in millions)
Foreign exchange contracts:
Intercompany loans and forecasted interest payments
$
4,369
$
3,743
Forecasted transactions
2,565
1,663
Commodity contracts
805
620
Interest rate contracts
2,273
2,259
Net investment hedge
–
euro notes
4,466
1,121
Net investment hedge
–
pound sterling notes
1,076
1,057