Western Union 2014 Annual Report Download - page 269

2014 FORM 10-K
THE WESTERN UNION COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
131
Foreign Currency — Consumer-to-Consumer
The Company's policy is to use longer-term foreign currency forward contracts, with maturities of up to 36 months at inception
and a targeted weighted-average maturity of approximately one year, to mitigate some of the risk that changes in foreign currency
exchange rates compared to the United States dollar could have on forecasted revenues denominated in other currencies related
to its business. As of December 31, 2014, the Company's longer-term foreign currency forward contracts had maturities of a
maximum of 24 months with a weighted-average maturity of approximately one year. These contracts are accounted for as cash
flow hedges of forecasted revenue, with effectiveness assessed based on changes in the spot rate of the affected currencies during
the period of designation. Accordingly, all changes in the fair value of the hedges not considered effective or portions of the hedge
that are excluded from the measure of effectiveness are recognized immediately in "Derivative gains/(losses), net" within the
Company's Consolidated Statements of Income.
The Company also uses short duration foreign currency forward contracts, generally with maturities from a few days up to
one month, to offset foreign exchange rate fluctuations on settlement assets and obligations between initiation and settlement. In
addition, forward contracts, typically with maturities of less than one year at inception, are utilized to offset foreign exchange rate
fluctuations on certain foreign currency denominated cash and other asset and liability positions. None of these contracts are
designated as accounting hedges.
The aggregate equivalent United States dollar notional amounts of foreign currency forward contracts as of December 31,
2014 were as follows (in millions):
Contracts designated as hedges:
Euro . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 391.4
Canadian dollar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114.1
British pound . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80.8
Australian dollar. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52.7
Swiss franc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44.0
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95.4
Contracts not designated as hedges:
Euro . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 294.4
Canadian dollar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77.1
British pound . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70.2
Australian dollar. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30.1
Other (a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 147.8
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(a) Comprised of exposures to 17 different currencies. None of these individual currency exposures is greater than $25 million.
Foreign Currency — Business Solutions
The Company writes derivatives, primarily foreign currency forward contracts and option contracts, mostly with small and
medium size enterprises and derives a currency spread from this activity as part of its Business Solutions operations. The Company
aggregates its Business Solutions payments foreign currency exposures arising from customer contracts, including the derivative
contracts described above, and hedges the resulting net currency risks by entering into offsetting contracts with established financial
institution counterparties (economic hedge contracts). The derivatives written are part of the broader portfolio of foreign currency
positions arising from its cross-currency payments operations, which primarily include spot exchanges of currency in addition to
forwards and options. The resulting foreign exchange revenues from the total portfolio of positions comprise Business Solutions
foreign exchange revenues. None of the derivative contracts used in Business Solutions operations are designated as accounting
hedges. The duration of these derivative contracts at inception is generally less than one year.