Oracle 2013 Annual Report Download - page 120

Table of Contents
ORACLE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
May 31, 2014
Foreign Currency Forward Contracts Not Designated as Hedges
We transact business in various foreign currencies and have established a program that primarily utilizes foreign currency forward contracts to
offset the risks associated with the effects of certain foreign currency exposures. Under this program, our strategy is to enter into foreign
currency forward contracts so that increases or decreases in our foreign currency exposures are offset by gains or losses on the foreign currency
forward contracts in order to mitigate the risks and volatility associated with our foreign currency transactions. We may suspend this program
from time to time. Our foreign currency exposures typically arise from intercompany sublicense fees, intercompany loans and other
intercompany transactions that are generally expected to be cash settled in the near term. Our foreign currency forward contracts are generally
short-term in duration. Our ultimate realized gain or loss with respect to currency fluctuations will generally depend on the size and type of
cross-currency exposures that we enter into, the currency exchange rates associated with these exposures and changes in those rates, the net
realized and unrealized gains or losses on foreign currency forward contracts to offset these exposures and other factors.
We neither use these foreign currency forward contracts for trading purposes nor do we designate these forward contracts as hedging instruments
pursuant to ASC 815. Accordingly, we recorded the fair values of these contracts as of the end of our reporting period to our consolidated
balance sheet with changes in fair values recorded to our consolidated statement of operations. The balance sheet classification for the fair values
of these forward contracts is prepaid expenses and other current assets for a net unrealized gain position and other current liabilities for a net
unrealized loss position. The statement of operations classification for changes in fair values of these forward contracts is non-operating
(expense) income, net, for both realized and unrealized gains and losses.
As of May 31, 2014 and 2013, respectively, the notional amounts of the forward contracts we held to purchase U.S. Dollars in exchange for
other major international currencies were $3.6 billion and $3.0 billion, respectively, and the notional amounts of forward contracts we held to
sell U.S. Dollars in exchange for other major international currencies were $2.0 billion and $1.1 billion, respectively. The fair values of our
outstanding foreign currency forward contracts were nominal at May 31, 2014 and 2013.
Included in our non-operating (expense) income, net were $(69) million, $(64) million and $43 million of net (losses) gains related to these
forward contracts for the years ended May 31, 2014, 2013 and 2012, respectively.
The effects of derivative and non-derivative instruments designated as hedges on our consolidated financial statements were as follows as of or
for each of the respective periods presented below (amounts presented exclude any income tax effects):
Fair Values of Derivative and Non-Derivative Instruments Designated as Hedges in Consolidated Balance Sheets
116
May 31, 2014
May 31, 2013
(in millions)
Balance Sheet Location
Fair Value
Balance Sheet Location
Fair Value
Interest rate swap agreements designated as fair value hedges
Other assets
$
15
Not applicable
$
—
Interest rate swap agreements designated as fair value hedges
Prepaid expenses and
other current assets
$
8
Other assets
$
41
Cross
-
currency swap agreements designated as cash flow hedges
Other assets
$
74
Not applicable
$
—
Foreign currency borrowings designated as net investment hedge
Notes payable and
other non-current
borrowings
$
(1,116
)
Not applicable
$
—