Toro 2013 Annual Report Download - page 69

cash flow hedge derivatives, except the ineffective portion, are forecasted transaction will not occur by the end of the originally
recorded in other comprehensive income (‘‘OCI’’), until net earn- specified time period or within an additional two-month period of
ings is affected by the variability of cash flows of the hedged trans- time thereafter, the gains and losses that were in AOCL are recog-
action. Gains and losses on the derivative representing either nized immediately in net earnings. In all situations in which hedge
hedge ineffectiveness or hedge components excluded from the accounting is discontinued and the derivative remains outstanding,
assessment of effectiveness are recognized in net earnings. The the company carries the derivative at its fair value on the consoli-
consolidated statement of earnings classification of effective hedge dated balance sheet, recognizing future changes in the fair value
results is the same as that of the underlying exposure. Results of in other income, net. For the fiscal years ended October 31, 2013
hedges of sales and foreign plant operations are recorded in net and 2012, there were no gains or losses on contracts reclassified
sales and cost of sales, respectively, when the underlying hedged into earnings as a result of the discontinuance of cash flow
transaction affects net earnings. The maximum amount of time the hedges. As of October 31, 2013, the notional amount of outstand-
company hedges its exposure to the variability in future cash flows ing forward contracts designated as cash flow hedges was
for forecasted trade sales and purchases is two years. Results of $134,186. Additionally, the company has one cross currency inter-
hedges of intercompany loans are recorded in other income, net est rate swap instrument outstanding as of October 31, 2013 for a
as an offset to the remeasurement of the foreign loan balance. fixed pay notional of 36,593 Romanian New Leu and receive float-
The company formally assesses, at a hedge’s inception and on ing notional of 8,500 Euro.
an ongoing basis, whether the derivatives that are designated as Derivatives Not Designated as Hedging Instruments. The
hedges have been highly effective in offsetting changes in the company also enters into foreign currency contracts that include
cash flows of the hedged transactions and whether those deriva- forward currency contracts and cross currency swaps to mitigate
tives may be expected to remain highly effective in future periods. the remeasurement of specific assets and liabilities on the consoli-
When it is determined that a derivative is not, or has ceased to be, dated balance sheet. These contracts are not designated as hedg-
highly effective as a hedge, the company discontinues hedge ing instruments. Accordingly, changes in the fair value of hedges
accounting prospectively. When the company discontinues hedge of recorded balance sheet positions, such as cash, receivables,
accounting because it is no longer probable, but it is still reasona- payables, intercompany notes, and other various contractual claims
bly possible that the forecasted transaction will occur by the end of to pay or receive foreign currencies other than the functional cur-
the originally expected period or within an additional two-month rency, are recognized immediately in other income, net, on the
period of time thereafter, the gain or loss on the derivative remains consolidated statements of earnings together with the transaction
in AOCL and is reclassified to net earnings when the forecasted gain or loss from the hedged balance sheet position.
transaction affects net earnings. However, if it is probable that a
The following table presents the fair value of the company’s derivatives and consolidated balance sheet location.
Asset Derivatives Liability Derivatives
October 31, 2013 October 31, 2012 October 31, 2013 October 31, 2012
Balance Balance Balance Balance
Sheet Fair Sheet Fair Sheet Fair Sheet Fair
Location Value Location Value Location Value Location Value
Derivatives Designated as Hedging Instruments
Forward currency contracts Prepaid expenses $ 558 Prepaid expenses $ 635 Accrued liabilities $1,381 Accrued liabilities $1,359
Cross currency contract Prepaid expenses –Prepaid expenses 661 Accrued liabilities 326 Accrued liabilities –
Derivatives Not Designated as Hedging Instruments
Forward currency contracts Prepaid expenses $ 708 Prepaid expenses $ 360 Accrued liabilities $ 550 Accrued liabilities $ 755
Cross currency contract Prepaid expenses –Prepaid expenses 385 Accrued liabilities 117 Accrued liabilities –
Total Derivatives $1,266 $2,041 $2,374 $2,114
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