Motorola 2011 Annual Report Download - page 85

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79
Interest Rate Risk
At December 31, 2011, the Company has $1.5 billion of long-term debt, including the current portion of long-
term debt, which is primarily priced at long-term, fixed interest rates.
As part of its liability management program, one of the Company’s European subsidiaries has outstanding
interest rate agreements (“Interest Agreements”) relating to euro-denominated loans. The interest on the Euro-
denominated loans is variable. The Interest Agreements change the characteristics of interest rate payments from
variable to maximum fixed-rate payments. The Interest Agreements are not accounted for as a part of a hedging
relationship and, accordingly, the changes in the fair value of the Interest Agreements are included in Other income
(expense) in the Company’s consolidated statements of operations. The weighted average fixed rate payment on the
Interest Agreement was 5.03%. The fair value of the Interest Agreements put the Company in a liability position of
$3 million at both December 31, 2011 and 2010.
Counterparty Risk
The use of derivative financial instruments exposes the Company to counterparty credit risk in the event of
nonperformance by counterparties. However, the Company’s risk is limited to the fair value of the instruments
when the derivative is in an asset position. The Company actively monitors its exposure to credit risk. At present
time, all of the counterparties have investment grade credit ratings. The Company is not exposed to material credit
risk with any single counterparty. As of December 31, 2011, the Company was exposed to an immaterial amount of
aggregate credit risk with all counterparties.
The following tables summarize the fair values and location in the consolidated balance sheets of all derivative
financial instruments held by the Company, including immaterial amounts related to held for sale businesses, at
December 31, 2011 and 2010:
Fair Values of Derivative Instruments
Assets Liabilities
December 31, 2011
Fair
Value
Balance
Sheet
Location
Fair
Value
Balance
Sheet
Location
Derivatives designated as hedging instruments:
Foreign exchange contracts $— Other assets $2 Other liabilities
Derivatives not designated as hedging instruments:
Foreign exchange contracts 1 Other assets 3 Other liabilities
Interest agreement contracts — Other assets 3 Other liabilities
Total derivatives not designated as hedging instruments 1 6
Total derivatives $ 1 $8
Fair Values of Derivative Instruments
Assets Liabilities
December 31, 2010
Fair
Value
Balance
Sheet
Location
Fair
Value
Balance
Sheet
Location
Derivatives designated as hedging instruments:
Foreign exchange contracts $ 1 Other assets $— Other liabilities
Derivatives not designated as hedging instruments:
Foreign exchange contracts 4 Other assets 15 Other liabilities
Interest agreement contracts — Other assets 3 Other liabilities
Total derivatives not designated as hedging instruments 4 18
Total derivatives $ 5 $18