Tyson Foods 2012 Annual Report Download - page 56

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56
The following table sets forth the pretax impact of cash flow hedge derivative instruments on the Consolidated Statements of Income
(in millions):
Gain/(Loss)
Recognized in OCI
on Derivatives
Consolidated
Statements of Income
Classification
Gain/(Loss)
Reclassified from
OCI to Earnings
2012 2011 2010 2012 2011 2010
Cash Flow Hedge – Derivatives
designated as hedging instruments:
Commodity contracts $ 24 $ (5) $ 6 Cost of Sales $ (16) $ 25 $ (6)
Foreign exchange contracts (8) 9 1 Other Income/Expense 4 — 1
Total $ 16 $ 4 $ 7 $ (12) $ 25 $ (5)
Fair value hedges
We designate certain futures contracts as fair value hedges of firm commitments to purchase livestock for slaughter. Our objective of
these hedges is to minimize the risk of changes in fair value created by fluctuations in commodity prices associated with fixed price
livestock firm commitments. We had the following aggregated notional values of outstanding forward contracts entered into to hedge
forecasted commodity purchases which are accounted for as a fair value hedge (in millions):
Metric September 29, 2012 October 1, 2011
Commodity:
Live Cattle Pounds 232 318
Lean Hogs Pounds 239 601
For these derivative instruments we designate and qualify as a fair value hedge, the gain or loss on the derivative, as well as the
offsetting gain or loss on the hedged item attributable to the hedged risk, are recognized in earnings in the same period. We include the
gain or loss on the hedged items (i.e., livestock purchase firm commitments) in the same line item, Cost of Sales, as the offsetting gain
or loss on the related livestock forward position.
in millions
Consolidated
Statements of Income
Classification 2012 2011 2010
Gain/(Loss) on forwards Cost of Sales $ 47 $ (78) $ (58)
Gain/(Loss) on purchase contract Cost of Sales (47) 78 58
Ineffectiveness related to our fair value hedges was not significant during fiscal 2012, 2011 and 2010.
Foreign net investment hedges
We utilize forward foreign exchange contracts to protect the value of our net investments in certain foreign subsidiaries. For derivative
instruments that are designated and qualify as a hedge of a net investment in a foreign currency, the gain or loss is reported in OCI as
part of the cumulative translation adjustment to the extent it is effective, with the related amounts due to or from counterparties
included in other liabilities or other assets. We utilize the forward-rate method of assessing hedge effectiveness. Any ineffective
portions of net investment hedges are recognized in the Consolidated Statements of Income during the period of change.
Ineffectiveness related to our foreign net investment hedges was not significant during fiscal 2012, 2011 and 2010. At September 29,
2012, and October 1, 2011, we had $27 million and $35 million, respectively, aggregate outstanding notional values related to our
forward foreign currency contracts accounted for as foreign net investment hedges.
The following table sets forth the pretax impact of these derivative instruments on the Consolidated Statements of Income (in
millions):
Gain/(Loss)
Recognized in OCI
on Derivatives
Consolidated
Statements of Income
Classification
Gain/(Loss)
Reclassified from
OCI to Earnings
2012 2011 2010 2012 2011 2010
Net Investment Hedge – Derivatives
designated as hedging instruments:
Foreign exchange contracts $ (2) $ (2) $ (1) Other Income/Expense $ — $ — $ —