Western Union 2015 Annual Report Download - page 233

THE WESTERN UNION COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
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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 the Company's 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.
The aggregate equivalent United States dollar notional amount of foreign currency derivative customer contracts held by the
Company in its Business Solutions operations as of December 31, 2015 was approximately $5.5 billion. The significant majority
of customer contracts are written in major currencies such as the Australian dollar, British pound, Canadian dollar, and euro.
Interest Rate Hedging — Corporate
The Company utilizes interest rate swaps to effectively change the interest rate payments on a portion of its notes from fixed-
rate payments to short-term LIBOR-based variable rate payments in order to manage its overall exposure to interest rates. The
Company designates these derivatives as fair value hedges. The change in fair value of the interest rate swaps is offset by a change
in the carrying value of the debt being hedged within "Borrowings" in the Consolidated Balance Sheets and "Interest expense" in
the Consolidated Statements of Income has been adjusted to include the effects of interest accrued on the swaps.
The Company, at times, utilizes derivatives to hedge the forecasted issuance of fixed-rate debt. These derivatives are designated
as cash flow hedges of the variability in the fixed-rate coupon of the debt expected to be issued. The effective portion of the change
in fair value of the derivatives is recorded in "Accumulated other comprehensive loss" in the Consolidated Balance Sheets.
The Company held interest rate swaps in an aggregate notional amount of $975.0 million as of December 31, 2015 and 2014.
Of this aggregate notional amount held at December 31, 2015, $500.0 million related to notes due in 2017, $300.0 million related
to notes due in 2018, and $175.0 million related to notes due in 2020.
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