National Oilwell Varco 2015 Annual Report Download - page 94

Table of Contents
The components of amounts reclassified from accumulated other comprehensive income (loss) are as follows (in millions):
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
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 
Revenue $ — $ (19) $ — $ (19) $ — $ (26) $ — $ (26) $ — $ (16) $ — $ (16)
Cost of revenue — 295 — 295 — 43 — 43 — 6 — 6
— — —
Selling, general, and
administrative — — (6) (6) — — (8) (8) — — (8) (8)
—
Other income
(expense), net — — — — 11 — — 11 (25) — — (25)
Tax effect — (77) 2 (75) — (5) 2 (3) — 2 1 3
$ — $ 199 $ (4) $ 195 $ 11 $ 12 $ (6) $ 17 $ (25) $ (8) $ (7) $ (40)
The Company’s reporting currency is the U.S. dollar. A majority of the Company’s international entities in which there is a substantial investment have the
local currency as their functional currency. As a result, currency translation adjustments resulting from the process of translating the entities’ financial
statements into the reporting currency are reported in other comprehensive income or loss in accordance with ASC Topic 830 “Foreign Currency Matters”
(“ASC Topic 830”). For the years ended December 31, 2015, 2014 and 2013 a majority of these local currencies weakened against the U.S. dollar resulting in
a net other comprehensive loss of $764 million, $543 million and $90 million, respectively, upon the translation from local currencies to the U.S. dollar. Due
to the sale of non-core industrial businesses, $11 million of currency translation losses and $25 million of currency translation gains were reclassified from
accumulated other comprehensive income (loss) into other income (expense), net in the Consolidated Statements of Income for the years ended December 31,
2014 and 2013 respectively.
The effect of changes in the fair values of derivatives designated as cash flow hedges are accumulated in other comprehensive income (loss), net of tax, until
the underlying transactions to which they are designed to hedge are realized. The movement in other comprehensive income (loss) from period to period will
be the result of the combination of changes in fair value for open derivatives and the outflow of other comprehensive income (loss) related to cumulative
changes in the fair value of derivatives that have settled in the current or prior periods. The accumulated effect was other comprehensive income of $23
million (net of tax of $14 million) for the year ended December 31, 2015, other comprehensive loss of $233 million (net of tax of $89 million) for the year
ended December 31, 2014 and other comprehensive loss of $37 million (net of tax of $18 million) for the year ended December 31, 2013.

We have received U.S. federal grand jury subpoenas and subsequent inquiries from U.S. governmental agencies requesting records related to our compliance
with U.S. export trade laws and regulations. We have cooperated fully with agents from the U.S. Department of Justice, the Department of Commerce Bureau
of Industry and Security, the United States Department of Treasury, Office of Foreign Assets Control, and U.S. Immigration and Customs Enforcement in
responding to the inquiries. We have also cooperated with an informal inquiry from the Securities and Exchange Commission in connection with the
inquiries previously made by the aforementioned federal agencies. We have conducted our own internal review of this matter. At the conclusion of our
internal review in the fourth quarter of 2009, we identified possible areas of concern and discussed these areas of concern with the relevant agencies. We are
currently negotiating a potential resolution with the agencies involved related to these matters. We currently anticipate that any administrative fine or
penalty agreed to as part of a resolution would be within established accruals, and would not have a material effect on our financial position or results of
operations. To the extent a resolution is not negotiated, we cannot predict the timing or effect that any resulting government actions may have on our
financial position or results of operations.
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