Western Union 2008 Annual Report Download - page 71

6969
Notes to Consolidated
Financial Statements
13. Stockholders’ Equity
Accumulated other comprehensive loss
Accumulated other comprehensive loss includes all
changes in equity during a period that have yet to be
recognized in income, except those resulting from trans-
actions with shareholders. The major components include
foreign currency translation adjustments, pension liability
adjustments, unrealized gains and losses on investment
securities and gains or losses from cash flow hedging
activities.
The assets and liabilities of foreign subsidiaries whose
functional currency is not the United States dollar are
translated using the appropriate exchange rate as of the
end of the year. Foreign currency translation adjustments
represent unrealized gains and losses on assets and lia-
bilities arising primarily from the difference in the foreign
country currency compared to the United States dollar.
These gains and losses are accumulated in comprehensive
income. When a foreign subsidiary is substantially liqui-
dated, the cumulative translation gain or loss is removed
from “Accumulated other comprehensive loss” and is
recognized as a component of the gain or loss on the sale
of the subsidiary.
A pension liability adjustment associated with our
defined benefit pension plans is recognized for the differ-
ence between estimated assumptions (e.g., asset returns,
discount rates, mortality) and actual results. The amount
in “Accumulated other comprehensive loss” is amortized
to income over the remaining life expectancy of the plan
participants. Details of the pension plans’ assets and obli-
gations are explained further in Note 11.
We record unrealized gains and losses on investment
securities that are available for sale, primarily municipal
securities, in accumulated other comprehensive income
until the investment is either sold or deemed other-than-
temporarily impaired. See Note 7 for further discussion.
The effective portion of the change in fair value of
derivatives that qualify as cash flow hedges are recorded
in accumulated other comprehensive income. Generally,
amounts are recognized in income when the related fore-
casted transaction affects earnings. See Note 14 for further
discussion.
The income tax effects allocated to and the cumula-
tive balance of each component of accumulated other
comprehensive loss are as follows (in millions):
2008 2007 2006
Beginning balance, January1 $(68.8) $(73.5) $(62.1)
Net unrealized gains/(losses) on investment securities:
Unrealized losses, net of tax benefits of $(0.9) in 2008, $(0.7) in 2007 and $(0.3) in 2006 (1.5) (1.4) (0.5)
Reclassification adjustment for losses/(gains) included in net income, net of tax benefit/
(expense) of $1.6 in 2008, $(0.1) in 2007, and $0.0 in 2006 2.7 (0.1) 0.1
Net unrealized gains/(losses) on investment securities 1.2 (1.5) (0.4)
Net unrealized gains/(losses) on hedging activities:
Unrealized gains/(losses), net of tax expense/(benefit) of $15.0 in 2008, $(14.6) in 2007
and $(1.6) in 2006 67.6 (41.3) (27.8)
Reclassification adjustment for losses /(gains) included in net income, net of tax benefit/
(expense) of $3.5 in 2008, $4.4 in 2007, and $(0.1) in 2006 21.6 26.9 (1.5)
Net unrealized gains/(losses) on hedging activities 89.2 (14.4) (29.3)
Net foreign currency translation adjustments and loss on disposal:
Foreign currency translation adjustments, net of tax (benefit)/expense of $(2.8) in 2008,
$2.8 in 2007, and $4.2 in 2006 (5.2) 5.3 6.4
Reclassification adjustment for loss on disposal included in net income — — 1.1
Net foreign currency translation adjustments and loss on disposal (5.2) 5.3 7.5
Net unrealized (losses)/gains on pension liability:
Unrealized (losses)/gains, net of tax (benefit)/expense of $(28.0) in 2008, $7.9 in 2007,
and $0.3 in 2006 (48.1) 13.0 8.2
Reclassification adjustment for losses included in net income, net of tax benefit of
$1.0 in 2008, $1.3 in 2007, and $1.6 in 2006 1.7 2.3 2.6
Net unrealized (losses)/gains on pension liability (46.4) 15.3 10.8
Other comprehensive income/(loss) 38.8 4.7 (11.4)
Ending balance, December31 $(30.0) $(68.8) $(73.5)
The components of accumulated other comprehensive loss were as follows (in millions):
2008 2007 2006
Unrealized (losses)/gains on investment securities $ 0.9 $ (0.3) $ 1.2
Unrealized (losses)/gains on hedging activities 45.5 (43.7) (29.3)
Foreign currency translation adjustment 18.1 23.3 18.0
Pension liability adjustment (94.5) (48.1) (63.4)
$(30.0) $(68.8) $(73.5)