Time Magazine 2013 Annual Report Download - page 103

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TIME WARNER INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
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, 2013, 2012 and 2011. In addition,
such gains and losses were largely offset by corresponding economic gains or losses from the respective
transactions that were hedged.
The Company monitors its positions with, and the credit quality of, the financial institutions that are party to
its financial transactions and has entered into collateral agreements with certain of these counterparties to further
protect the Company in the event of the deterioration of the credit quality of such counterparties. Additionally,
netting provisions are included in agreements in situations where the Company executes multiple contracts with
the same counterparty. The Company offsets the fair values of the foreign exchange derivatives contracts
executed with the same counterparty and classifies that amount as a net asset or net liability within Prepaid
expenses and other current assets or Accounts payable and accrued liabilities, respectively, in the Consolidated
Balance Sheet. 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, 2013 and December 31, 2012 (millions):
December 31,
2013(a)
December 31,
2012(b)
Prepaid expenses and other current assets .......................... $ 10 $ 9
Accounts payable and accrued liabilities ........................... (17) (31)
(a) Includes $77 million ($64 million of qualifying hedges and $13 million of economic hedges) and $84 million ($53 million of qualifying
hedges and $31 million of economic hedges) of foreign exchange derivative contracts in asset and liability positions, respectively.
(b) Includes $79 million ($69 million of qualifying hedges and $10 million of economic hedges) and $101 million ($81 million of qualifying
hedges and $20 million of economic hedges) of foreign exchange derivative contracts in asset and liability positions, respectively.
At December 31, 2013 and December 31, 2012, $28 million and $19 million of gains, respectively, related to
cash flow hedges are recorded in Accumulated other comprehensive loss, net and are expected to be recognized
in earnings at the same time the hedged items affect earnings. Included in Accumulated other comprehensive
loss, net are deferred net gains of $21 million and $8 million at December 31, 2013 and December 31, 2012,
respectively, related to hedges of cash flows associated with films that are not expected to be released within the
next twelve months.
8. LONG-TERM DEBT AND OTHER FINANCING ARRANGEMENTS
The Company’s long-term debt and other financing arrangements consist of revolving bank credit facilities, a
commercial paper program, fixed-rate public debt and other obligations. Long-term debt consists of (millions)(a):
December 31,
2013 2012
Fixed-rate public debt ............................................. $ 19,905 $ 19,620
Other obligations ................................................. 260 251
Subtotal ........................................................ 20,165 19,871
Debt due within one year ........................................... (66) (749)
Total long-term debt .............................................. $ 20,099 $ 19,122
(a) Represents principal amounts adjusted for premiums and discounts.
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