Xerox 2011 Annual Report Download - page 87

85Xerox 2011 Annual Report
The following table provides a summary of gains (losses) on non-designated derivative instruments:
Year Ended December 31,
Derivatives NOT Designated as Hedging Instruments Location of Derivative Gain (Loss) 2011 2010 2009
Foreign exchange contracts – forwards Other expense – Currency gains (losses), net $ 33 $ 113 $ 49
During the three years ended December 31, 2011, we recorded
Currency losses, net of $12, $11 and $26, respectively. Currency losses,
net includes the mark-to-market adjustments of the derivatives not
designated as hedging instruments and the related cost of those
derivatives, as well as the re-measurement of foreign currency-
denominated assets and liabilities.
Accumulated Other Comprehensive Loss (“AOCL”)
Refer to Note 19 – Comprehensive Income “Accumulated Other
Comprehensive Loss” section in for the activity associated with all of our
designated cash flow hedges (interest rate and foreign currency).
Note 13 – Fair Value of Financial Assets and Liabilities
The following table represents assets and liabilities measured at fair value
on a recurring basis. The basis for the measurement at fair value in all
cases is Level 2 – Significant Other Observable Inputs.
December 31,
2011 2010
Assets:
Foreign exchange contracts-forwards $ 58 $ 45
Interest rate swaps — 11
Deferred compensation investments
in cash surrender life insurance 69 70
Deferred compensation investments
in mutual funds 23 22
Total $ 150 $ 148
Liabilities:
Foreign exchange contracts-forwards $ 31 $ 19
Deferred compensation plan liabilities 97 98
Total $ 128 $ 117
We utilize the income approach to measure the fair value for our derivative
assets and liabilities. The income approach uses pricing models that rely
on market observable inputs such as yield curves, currency exchange rates
and forward prices, and therefore are classified as Level 2.
Fair value for our deferred compensation plan investments in Company-
owned life insurance is reflected at cash surrender value. Fair value for
our deferred compensation plan investments in mutual funds is based
on quoted market prices for actively traded investments similar to those
held by the plan. Fair value for deferred compensation plan liabilities
is based on the fair value of investments corresponding to employees’
investment selections, based on quoted prices for similar assets in
actively traded markets.
Summary of Other Financial Assets and Liabilities Not Measured at
Fair Value on a Recurring Basis
The estimated fair values of our other financial assets and liabilities not
measured at fair value on a recurring basis were as follows:
December 31, 2011 December 31, 2010
Carrying Fair Carrying Fair
Amount Value Amount Value
Cash and cash
equivalents $902 $902 $1,211 $1,211
Accounts receivable,
net 2,600 2,600 2,826 2,826
Short-term debt 1,545 1,629 1,370 1,396
Long-term debt 7,088 7,571 7,237 7,742
Liability to subsidiary
trust issuing
preferred securities — — 650 670
The fair value amounts for Cash and cash equivalents and Accounts
receivable, net, approximate carrying amounts due to the short maturities
of these instruments. The fair value of Short- and Long-term debt, as
well as our Liability to subsidiary trust issuing preferred securities, was
estimated based on quoted market prices for publicly traded securities
or on the current rates offered to us for debt of similar maturities. The
difference between the fair value and the carrying value represents the
theoretical net premium or discount we would pay or receive to retire all
debt at such date.
Notes to the Consolidated
Financial Statements
(in millions, except per-share data and where otherwise noted)