Motorola 2013 Annual Report Download - page 51

Download and view the complete annual report

Please find page 51 of the 2013 Motorola annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 111

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111

49
derivative contracts for some of our non-functional currency cash, receivables, and payables, which are primarily denominated
in major currencies that can be traded on open markets. We typically use forward contracts and options to hedge these currency
exposures. In addition, we enter into derivative contracts for some forecasted transactions, which are designated as part of a
hedging relationship if it is determined that the transaction qualifies for hedge accounting under the provisions of the
authoritative accounting guidance for derivative instruments and hedging activities. A portion of our exposure is from
currencies that are not traded in liquid markets and these are addressed, to the extent reasonably possible, by managing net
asset positions, product pricing and component sourcing.
At December 31, 2013, we had outstanding foreign exchange contracts totaling $837 million, compared to $523
million outstanding at December 31, 2012. Management believes that these financial instruments should not subject us to
undue risk due to foreign exchange movements because gains and losses on these contracts should generally offset losses and
gains on the underlying assets, liabilities and transactions, except for the ineffective portion of the instruments, which is
charged to Other within Other income (expense) in our consolidated statements of operations.
The following table shows the five largest net notional amounts of the positions to buy or sell foreign currency as of
December 31, 2013 and the corresponding positions as of December 31, 2012:
Notional Amount
Net Buy (Sell) by Currency 2013 2012
British Pound $ 257 $ 225
Chinese Renminbi (181)(99)
Euro (132)(9)
Norwegian Krone (95)(48)
Brazilian Real (44)3
Foreign exchange financial instruments that are subject to the effects of currency fluctuations, which may affect reported
earnings, include derivative financial instruments and other monetary assets and liabilities denominated in a currency other than
the functional currency of the legal entity holding the instrument. Derivative financial instruments consist primarily of currency
forward contracts and options. Other monetary assets and liabilities denominated in a currency other than the functional
currency of the legal entity consist primarily of cash, cash equivalents, short-term investments, as well as accounts payable and
receivable. Accounts payable and receivable are reflected at fair value in the financial statements. Assuming the amounts of the
outstanding foreign exchange contracts represent our underlying foreign exchange risk related to monetary assets and
liabilities, a hypothetical unfavorable 10% movement in the foreign exchange rates, from current levels, would reduce the value
of those monetary assets and liabilities by approximately $82 million. Our market risk calculation represents an estimate of
reasonably possible net losses that would be recognized assuming hypothetical 10% movements in future currency market
pricing and is not necessarily indicative of actual results, which may or may not occur. It does not represent the maximum
possible loss or any expected loss that may occur, since actual future gains and losses will differ from those estimated, based
upon, among other things, actual fluctuation in market rates, operating exposures, and the timing thereof. We believe, however,
that any such loss incurred would be offset by the effects of market rate movements on the respective underlying derivative
financial instruments transactions. The foreign exchange financial instruments are held for purposes other than trading.
At December 31, 2013, the maximum term of derivative instruments that hedge forecasted transactions was
seven months. The weighted average duration of our derivative instruments that hedge forecasted transactions was three
months.