Pfizer 2013 Annual Report Download - page 89

Notes to Consolidated Financial Statements
Pfizer Inc. and Subsidiary Companies
88
2013 Financial Report
The following table provides information about the gains/(losses) incurred to hedge or offset operational foreign exchange or interest rate
risk:
Amount of
Gains/(Losses)
Recognized in OID(a), (b), (c)
Amount of Gains/(Losses)
Recognized in OCI
(Effective Portion)(a), (d)
Amount of Gains/(Losses)
Reclassified from
OCI into OID
(Effective Portion)(a), (d)
(MILLIONS OF DOLLARS)
Dec 31,
2013
Dec 31,
2012
Dec 31,
2013
Dec 31,
2012
Dec 31,
2013
Dec 31,
2012
Derivative Financial Instruments in Cash Flow
Hedge Relationships:
Foreign currency swaps $—$—$554 $703 $220 $257
Foreign currency forward-exchange contracts ——(66)42 (126)359
Derivative Financial Instruments in Net
Investment Hedge Relationships:
Foreign currency swaps (3)(4) 156 200 ——
Foreign currency forward-exchange contracts (3)—(1) — —
Derivative Financial Instruments Not Designated
as Hedges:
Foreign currency forward-exchange contracts 56 (61)————
Foreign currency swaps (18) (7) ————
Non-Derivative Financial Instruments in Net
Investment Hedge Relationships:
Foreign currency long-term debt ——133 88 ——
All other net (1)7————
$31 $(65)$776 $1,033 $94$616
(a) OID = Other (income)/deductions—net, included in Other (income)/deductions—net in the consolidated statements of income. OCI = Other comprehensive
income/(loss), included in the consolidated statements of comprehensive income.
(b) Also includes gains and losses attributable to derivative instruments designated and qualifying as fair value hedges as well as the offsetting gains and losses
attributable to the hedged items in such hedging relationships.
(c) There was no significant ineffectiveness for any period presented.
(d) Amounts presented represent the effective portion of the gain or loss. For derivative financial instruments in cash flow hedge relationships, the effective portion
is included in Other comprehensive income/(loss)––Unrealized holding gains/(losses) on derivative financial instruments. For derivative financial instruments in
net investment hedge relationships and for foreign currency debt designated as hedging instruments, the effective portion is included in Other comprehensive
income/(loss)––Foreign currency translation adjustments.
For information about the fair value of our derivative financial instruments, and the impact on our consolidated balance sheets, see Note 7A.
Financial Instruments: Selected Financial Assets and Liabilities above. Certain of our derivative instruments are covered by associated credit-
support agreements that have credit-risk-related contingent features designed to reduce our counterparties’ exposure to our risk of defaulting
on amounts owed. As of December 31, 2013, the aggregate fair value of these derivative instruments that are in a net liability position is $128
million, for which we have posted collateral of $99 million in the normal course of business. These features include the requirement to pay
additional collateral in the event of a downgrade in our debt ratings. If there had been a downgrade to below an A rating by S&P or the
equivalent rating by Moody’s Investors Service, on December 31, 2013, we would have been required to post an additional $32 million of
collateral to our counterparties. The collateral advanced receivables are reported in Cash and cash equivalents.
F. Credit Risk
On an ongoing basis, we review the creditworthiness of counterparties to our foreign exchange and interest rate agreements and do not
expect to incur a significant loss from failure of any counterparties to perform under the agreements. There are no significant concentrations of
credit risk related to our financial instruments with any individual counterparty. As of December 31, 2013, we had $2.9 billion due from a well-
diversified, highly rated group (S&P ratings of mostly A+ or better) of bank counterparties around the world. For details about our investments,
see Note 7B. Financial Instruments: Investments in Debt Securities.
In general, there is no requirement for collateral from customers. However, derivative financial instruments are executed under master netting
agreements with financial institutions and these agreements contain provisions that provide for the ability for collateral payments, depending
on levels of exposure, our credit rating and the credit rating of the counterparty. For information about our financial instruments (excluding the
impact of collateral), see Note 7A. Financial Instruments: Selected Financial Assets and Liabilities and Note 7B. Financial Instruments:
Investments in Debt Securities above. For information about the collateral posted on our derivative instruments, see Note 7E. Financial
Instruments: Derivative Financial Instruments and Hedging Activities above. As of December 31, 2013, we received cash collateral of $959
million from various counterparties. The collateral primarily supports the approximate fair value of our derivative contracts. With respect to the
collateral received, which is included in Cash and cash equivalents, the obligations are reported in Short-term borrowings, including current
portion of long-term debt.