AbbVie 2013 Annual Report Download - page 59

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in the first quarter of 2013 recorded in net foreign exchange loss (gain) on the consolidated statement
of earnings for 2013.
Interest Rate Risk
Interest rate swaps are used to manage the company’s exposure of changes in interest rates on the fair
value of fixed-rate debt. The effect of these hedges is to change the fixed interest rate to a variable
rate. AbbVie does not use derivative instruments, such as interest rate swaps, to manage its exposure to
changes in interest rates for investment securities. At both December 31, 2013 and December 31, 2012,
AbbVie had interest rate hedge contracts totaling $8.0 billion. The company estimates that an increase
in the interest rates of 100-basis points would have decrease the fair value of our interest rate swap
contracts by approximately $411 million at December 31, 2013. If realized, the fair value reduction
would affect earnings over the remaining life of the contracts. The company estimates that an increase
of 100-basis points in long-term interest rates would decrease the fair value of long-term debt by
$848 million at December 31, 2013. A 100-basis point change is believed to be a reasonably possible
near-term change in interest rates.
Market Price Sensitive Investments
AbbVie holds available-for-sale equity securities from strategic technology acquisitions. The fair value
of these investments was approximately $49 million and $12 million as of December 31, 2013 and 2012,
respectively. AbbVie monitors these investments for other than temporary declines in market value, and
charges impairment losses to income when an other than temporary decline in value occurs. A
hypothetical 20 percent decrease in the share prices of these investments would have had an immaterial
decrease to their fair value at December 31, 2013. A 20 percent decrease is believed to be a reasonably
possible near-term change in share prices.
Non-Publicly Traded Equity Securities
AbbVie holds equity securities from strategic technology acquisitions that are not traded on public
stock exchanges. The carrying value of these investments was approximately $58 million and $72 million
as of December 31, 2013 and 2012, respectively. AbbVie monitors these investments for other than
temporary declines in market value, and charges impairment losses to income when an other than
temporary decline in estimated value occurs.
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