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Notes to Consolidated Financial Statements
Pfizer Inc. and Subsidiary Companies
2015 Financial Report
99
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)
As of December 31,
(MILLIONS OF DOLLARS) 2015 2014 2015 2014 2015 2014
Derivative Financial Instruments in Cash
Flow Hedge Relationships:
Foreign currency swaps $—$—$(826)$(799)$(613)$(808)
Foreign currency forward-exchange
contracts ——1,028 823 980 332
Derivative Financial Instruments in Net
Investment Hedge Relationships:
Foreign currency swaps ———78 ——
Foreign currency forward-exchange
contracts (1)—256 ———
Derivative Financial Instruments Not
Designated as Hedges:
Foreign currency forward-exchange
contracts (42) 164 ————
Foreign currency swaps (4)(2) ————
Non-Derivative Financial Instruments in
Net Investment Hedge Relationships:
Foreign currency short-term borrowings ——3———
Foreign currency long-term debt ———33 ——
All other net (16) (3) ————
$(64)$160 $461 $135 $367 $(477)
(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) For derivative financial instruments in cash flow hedge relationships, the effective portion is included in Other comprehensive income/(loss)––Unrealized holding
gains on derivative financial instruments, net. 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
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, 2015, the aggregate
fair value of these derivative instruments that are in a net liability position was $1.1 billion, for which we have posted collateral of $1.1 billion 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 Standard and Poor’s (S&P) or the equivalent rating by Moody’s Investors
Service, on December 31, 2015, we would have been required to post an additional $20 million of collateral to our counterparties. The
collateral advanced receivables are reported in Short-term investments.
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, 2015, we had $2.4 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 above.
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. As of December 31, 2015, we received cash collateral of $1.0
billion 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.