Tyson Foods 2015 Annual Report Download - page 69
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Please find page 69 of the 2015 Tyson Foods 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.Fairvaluehedges
Wedesignatecertainderivativecontractsasfairvaluehedgesoffirmcommitmentstopurchaselivestockforslaughter.Ourobjectiveofthesehedgesisto
minimizetheriskofchangesinfairvaluecreatedbyfluctuationsincommoditypricesassociatedwithfixedpricelivestockfirmcommitments.Forthesederivative
instrumentswedesignateandqualifyasafairvaluehedge,thegainorlossonthederivative,aswellastheoffsettinggainorlossonthehedgeditemattributableto
thehedgedrisk,arerecognizedinearningsinthesameperiod.Weincludethegainorlossonthehedgeditems(i.e.,livestockpurchasefirmcommitments)inthe
samelineitem,CostofSales,astheoffsettinggainorlossontherelatedlivestockforwardposition.
inmillions
Consolidated
StatementsofIncome
Classification
2015
2014
2013
Gain(Loss)onforwards
CostofSales
$ 17
$ (154)
$ 21
Gain(Loss)onpurchasecontract
CostofSales
(17)
154
(21)
Ineffectivenessrelatedtoourfairvaluehedgeswasnotsignificantduringfiscal2015,2014and2013.
Undesignatedpositions
Inadditiontoourdesignatedpositions,wealsoholdderivativecontractsforwhichwedonotapplyhedgeaccounting.Theseincludecertainderivativeinstruments
relatedtocommoditiespricerisk,includinggrains,livestock,energyandforeigncurrencyrisk.Wemarkthesepositionstofairvaluethroughearningsateach
reportingdate.
ThefollowingtablesetsforththepretaximpactoftheundesignatedderivativeinstrumentsintheConsolidatedStatementsofIncome:
inmillions
Consolidated
StatementsofIncome
Classification
Gain(Loss)
Recognized
inEarnings
2015
2014
2013
Derivativesnotdesignatedashedginginstruments:
Commoditycontracts
Sales
$ (62)
$ 75
$ (10)
Commoditycontracts
CostofSales
(33)
(136)
(24)
Foreignexchangecontracts
OtherIncome/Expense
(4)
—
2
Total
$ (99)
$ (61)
$ (32)
ThefairvalueofalloutstandingderivativeinstrumentsintheConsolidatedBalanceSheetsareincludedinNote13:FairValueMeasurements.
NOTE 13: FAIR VALUE MEASUREMENTS
Fairvalueisdefinedasthepricethatwouldbereceivedtosellanassetorpaidtotransferaliability(anexitprice)intheprincipalormostadvantageousmarketfor
theassetorliabilityinanorderlytransactionbetweenmarketparticipantsonthemeasurementdate.Thefairvaluehierarchycontainsthreelevelsasfollows:
Level1—Unadjustedquotedpricesavailableinactivemarketsfortheidenticalassetsorliabilitiesatthemeasurementdate.
Level2—Otherobservableinputsavailableatthemeasurementdate,otherthanquotedpricesincludedinLevel1,eitherdirectlyorindirectly,including:
• Quotedpricesforsimilarassetsorliabilitiesinactivemarkets;
• Quotedpricesforidenticalorsimilarassetsinnon-activemarkets;
• Inputsotherthanquotedpricesthatareobservablefortheassetorliability;and
• Inputsderivedprincipallyfromorcorroboratedbyotherobservablemarketdata.
Level3—Unobservableinputsthatcannotbecorroboratedbyobservablemarketdataandreflecttheuseofsignificantmanagementjudgment.Thesevaluesare
generallydeterminedusingpricingmodelsforwhichtheassumptionsutilizemanagement’sestimatesofmarketparticipantassumptions.
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