Time Magazine 2010 Annual Report Download - page 92

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associated with foreign-currency-denominated operating assets and liabilities (i.e., fair value hedges). For these
qualifying hedge relationships, the Company excludes the impact of forward points from its assessment of hedge
effectiveness. As a result, changes in the fair value of forward points are recorded in other loss, net in the
consolidated statement of operations each quarter.
The Company also enters into derivative contracts that economically hedge certain of its foreign currency risks,
even though hedge accounting does not apply or the Company elects not to apply hedge accounting. These economic
hedges are used primarily to offset the change in certain foreign currency denominated long-term receivables and
certain foreign-currency-denominated debt due to changes in the underlying foreign exchange rates.
Gains and losses from hedging activities recognized in the consolidated statement of operations, including
hedge ineffectiveness, were not material for the years ended December 31, 2010 and December 31, 2009. In
addition, such gains and losses were largely offset by corresponding economic gains or losses from the respective
transactions that were hedged.
The following is a summary of amounts recorded in the consolidated balance sheet pertaining to Time Warner’s
use of foreign currency derivatives at December 31, 2010 and December 31, 2009 (millions):
December 31, 2010 December 31, 2009
Qualifying Hedges
Assets .......................................... $ 86 $ 90
Liabilities ........................................ (79) (137)
Economic Hedges
Assets .......................................... $ 17 $ 7
Liabilities ........................................ (27) (43)
The Company monitors its positions with, and the credit quality of, the financial institutions that are party to
any of its financial transactions. Additionally, netting provisions are included in existing agreements in situations
where the Company executes multiple contracts with the same counterparty. As a result, net assets or liabilities
resulting from foreign exchange derivatives subject to these netting agreements are classified within prepaid assets
and other current assets or accounts payable and accrued expenses in the Company’s consolidated balance sheet. At
December 31, 2010 and December 31, 2009, $21 million and $61 million, respectively, of losses related to cash flow
hedges are recorded in accumulated other comprehensive income and are expected to be recognized in earnings at
the same time the hedged items affect earnings. Included in accumulated other comprehensive income are deferred
net losses of $17 million at December 31, 2010 and December 31, 2009, related to hedges of cash flows associated
with films that are not expected to be released within the twelve-month period ending December 31, 2011.
8. LONG-TERM DEBT AND OTHER FINANCING ARRANGEMENTS
Long-term debt consists of (millions)
(a)
:
December 31,
2010
December 31,
2009
Outstanding Debt
Fixed-rate public debt ..................................... $ 16,276 $ 15,227
Other obligations ......................................... 273 981
Subtotal ................................................ 16,549 16,208
Debt due within one year ................................... (26) (57)
Non-recourse debt ........................................ — (805)
Total long-term debt ....................................... $ 16,523 $ 15,346
(a)
Represents principal amounts adjusted for premiums and discounts.
80
TIME WARNER INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)