Western Union 2013 Annual Report Download - page 243

2013 FORM 10-K
THE WESTERN UNION COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
133
(b) The portion of the change in fair value of a derivative excluded from the effectiveness assessment for foreign currency
forward contracts designated as cash flow hedges represents the difference between changes in forward rates and spot
rates.
(c) The Company uses derivatives to hedge the forecasted issuance of fixed-rate debt and records the effective portion of the
derivative's fair value in "Accumulated other comprehensive loss" in the Consolidated Balance Sheets. These amounts
are reclassified to "Interest expense" in the Consolidated Statements of Income over the life of the related notes.
(d) The Company uses foreign currency forward and option contracts as part of its Business Solutions payments operations.
These derivative contracts are excluded from this table as they are managed as part of a broader currency portfolio that
includes non-derivative currency exposures. The gains and losses on these derivatives are included as part of the broader
disclosure of portfolio revenue for this business discussed above.
(e) The Company uses foreign currency forward contracts to offset foreign exchange rate fluctuations on settlement assets
and obligations as well as certain foreign currency denominated positions. Foreign exchange gains/(losses) on settlement
assets and obligations and cash balances, not including amounts related to derivatives activity as displayed above, were
$(5.4) million, $7.8 million and $(20.5) million for the years ended 2013, 2012 and 2011, respectively.
(f) The derivative contracts used in the Company's revenue hedging program are not designated as hedges in the final month
of the contract. Additionally, in the year ended December 31, 2011, the Company entered into derivative contracts,
consisting of foreign currency forward contracts with maturities of less than one year, to reduce the economic variability
related to the cash amounts used to fund acquisitions of businesses with purchase prices denominated in foreign currencies,
primarily for the TGBP acquisition, and recorded a net gain of $20.8 million in "Derivatives gains/(losses), net."
An accumulated other comprehensive pre-tax loss of $11.4 million related to the foreign currency forward contracts is expected
to be reclassified into revenue within the next 12 months as of December 31, 2013. Approximately $3.6 million of net losses on
the forecasted debt issuance hedges are expected to be recognized in "Interest expense" in the Consolidated Statements of Income
within the next 12 months as of December 31, 2013. No amounts have been reclassified into earnings as a result of the underlying
transaction being considered probable of not occurring within the specified time period.