AMD 2015 Annual Report Download - page 91

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The following table shows the fair value amounts included in Other current assets should the foreign
currency forward contracts be in a gain position or included in Other current liabilities should these contracts be
in a loss position. As of December 26, 2015, the Company’s outstanding contracts were in a net loss position of
$6 million. These amounts were recorded in the Company’s consolidated balance sheets as follows:
December 26,
2015
December 27,
2014
(In millions)
Foreign Currency Forward Contracts—gains (losses)
Contracts designated as cash flow hedging instruments ...... $ (6) $(6)
Contracts not designated as hedging instruments ........... $— $(1)
For the foreign currency contracts designated as cash flow hedges, the ineffective portions of the hedging
relationship and the amounts excluded from the assessment of hedge effectiveness were immaterial.
As of December 26, 2015 and December 27, 2014, the notional values of the Company’s outstanding
foreign currency forward contracts were $156 million and $298 million, respectively. All the contracts mature
within 12 months, and, upon maturity, the amounts recorded in accumulated other comprehensive income (loss)
are expected to be reclassified into earnings. The Company hedges its exposure to the variability in future cash
flows for forecasted transactions over a maximum of 12 months.
Fair Value Hedges
In the third quarter of 2014, the Company entered into fixed-to-floating interest rate swaps on a notional
amount of $250 million to hedge a portion of the Company’s 6.75% Senior Notes due 2019 (6.75% Notes). The
purpose of these swaps is to manage a portion of the Company’s exposure to interest rate risk by converting fixed
rate interest payments to floating rate interest payments. The swaps effectively converted a portion of the fixed
interest payments payable on the 6.75% Notes into variable interest payments based on LIBOR. The interest rate
swaps are designated as a fair value hedge. Because the specific terms and notional amount of the swaps are
intended to match the portion of the 6.75% Notes being hedged, it is assumed to be a highly effective hedge.
Accordingly, changes in the fair value of the interest rate swaps are exactly offset by changes in the fair value of
the 6.75% Notes. All changes in fair value of the swaps are recorded on the Company’s consolidated balance
sheets with no net impact to the Company’s consolidated statements of operations.
The Company’s fair value hedge derivative contracts are classified within Level 2 because the valuation
inputs are based on quoted prices and market observable data of similar instruments in active markets.
The following table shows the fair value amounts included in Other assets should the fair value hedge
derivative contracts be in a gain position or included in Other long-term liabilities should these contracts be in a
loss position. These amounts were recorded in the Company’s consolidated balance sheets as follows:
December 26,
2015
December 27,
2014
(In millions)
Interest Rate Swap Contracts—gains (losses)
Contracts designated as fair value hedging instruments ...... $7 $3
NOTE 8: Concentrations of Credit and Operation Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily
of investments in debt securities, trade receivables and derivative financial instruments used in hedging activities.
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