Toshiba 2009 Annual Report Download - page 99

Download and view the complete annual report

Please find page 99 of the 2009 Toshiba annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 108

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108

47
Due to their anti-dilutive effect, incremental shares from assumed conversions of dilutive convertible debentures are excluded
from the calculation of loss per share for the year ended March, 2009 as well as calculation of diluted net loss per share from
discontinued operations for the year ended March 31, 2008.
Net earnings (loss) per share amounts are computed independently for net earnings (loss) from continuing operations, net
loss from discontinued operations and net earnings (loss). Consequently, the sum of diluted per share amounts from continu-
ing operations and discontinued operations for the year ended March 31, 2008 may not equal the total per share amounts for
net earnings (loss).
21. FINANCIAL INSTRUM ENTS
(1) DERIVATIVE FINANCIAL INSTRUM ENTS
The Company operates internationally, giving rise to exposure to market risks from fluctuations in foreign currency exchange and
interest rates. In the normal course of its risk management efforts, the Company employs a variety of derivative financial instruments,
which are consisted principally of forward exchange contracts, interest rate swap agreements, currency swap agreements, and curren-
cy options to reduce its exposures. The Company has policies and procedures for risk management and the approval, reporting and
monitoring of derivative financial instruments. The Company’s policies prohibit holding or issuing derivative financial instruments
for trading purposes.
The Company is exposed to credit-related losses in the event of nonperformance by counterparties to derivative financial instru-
ments, but the Company does not anticipate any credit-related loss from nonperformance by the counterparties because the counter-
parties are financial institutions of high credit standing and contracts are diversified across a number of major financial institutions.
The Company has entered into forward exchange contracts with financial institutions as hedges against fluctuations in foreign
currency exchange rates on monetary assets and liabilities denominated in foreign currencies. The forward exchange contracts related
to accounts receivable and payable, and commitments on future trade transactions denominated in foreign currencies, mature pri-
marily within a few years of the balance sheet date.
Interest rate swap agreements, currency swap agreements and currency options are used to limit the Company’s exposure to losses
in relation to underlying debt instruments and accounts receivable and payable denominated in foreign currencies resulting from
adverse fluctuations in foreign currency exchange and interest rates. These agreements mature during the period 2009 to 2015.
Forward exchange contracts, interest rate swap agreements, currency swap agreements and currency options are designated as
either fair value hedges or cash flow hedges, except for some contracts, depending on accounts receivable and payable denominated in
foreign currencies or commitments on future trade transactions and the interest rate characteristics of the underlying debt as dis-
cussed below.
Fair Value Hedge Strategy
The forward exchange contracts and currency swap agreements utilized by the Company effectively reduce fluctuation in fair
value of accounts receivable and payable denominated in foreign currencies.
The interest rate swap agreements utilized by the Company effectively convert a portion of its fixed-rate debt to a floating-
rate basis.
The gain or loss on the derivative financial instruments designated as fair value hedges is offset by the loss or gain on the
hedged items in the same location of the consolidated statements of income.
Cash Flow Hedge Strategy
The forward exchange contracts and currency options utilized by the Company effectively reduce fluctuation in cash flow from
commitments on future trade transactions denominated in foreign currencies for the next 6 years.
The interest rate swap agreements utilized by the Company effectively convert a portion of its floating-rate debt to a fixed-
rate basis for the next 7 years.
The Company expects to reclassify ¥697 million ($7,112 thousand) of net losses on derivative financial instruments from
accumulated other comprehensive income (loss) to earnings during the next 12 months due to the collection of accounts
receivable denominated in foreign currencies and the payments of accounts payable denominated in foreign currencies and
variable interest associated with the floating-rate debts.
Derivatives Not Designated as Hedging Instruments Strategy
The Company has entered into certain forward exchange contracts and interest rate swap agreements to offset the earnings
impact related to fluctuations in foreign currency exchange rates on monetary assets and liabilities denominated in foreign cur-
rencies and in interest rates on debt instruments. Although some of these contracts have not been designated as hedges as
required in order to apply hedge accounting, the contracts are effective from an economic perspective. The changes in the fair
value of those contracts are recorded in earnings immediately.