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ADOBE SYSTEMS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
80
to hedges of forecasted transactions that did not occur were insignificant. For fiscal 2012, there were no such gains or losses
recognized in interest and other income, net relating to hedges of forecasted transactions that did not occur.
We evaluate hedge effectiveness at the inception of the hedge prospectively as well as retrospectively and record any
ineffective portion of the hedging instruments in interest and other income, net on our Consolidated Statements of Income. The
net gain (loss) recognized in interest and other income (expense), net for cash flow hedges due to hedge ineffectiveness was
insignificant for all fiscal years presented. The time value of purchased contracts is recorded in interest and other income (expense),
net in our Consolidated Statements of Income.
Balance Sheet Hedging—Hedging of Foreign Currency Assets and Liabilities
We also hedge our net recognized foreign currency denominated assets and liabilities with foreign exchange forward contracts
to reduce the risk that the value of these assets and liabilities will be adversely affected by changes in exchange rates. These
contracts hedge assets and liabilities that are denominated in foreign currencies and are carried at fair value with changes in the
fair value recorded to interest and other income (expense), net in our Consolidated Statements of Income. These contracts do not
subject us to material balance sheet risk due to exchange rate movements because gains and losses on these derivatives are intended
to offset gains and losses on the assets and liabilities being hedged. As of November 28, 2014, total notional amounts of outstanding
contracts were $235.5 million which included the notional equivalent of $137.2 million in Euros, $30.9 million in British Pounds
and $67.4 million in other foreign currencies. As of November 29, 2013, total notional amounts of outstanding contracts were
$282.8 million which included the notional equivalent of $99.0 million in Euros, $33.8 million in British Pounds and $150.0
million in other foreign currencies. At November 28, 2014 and November 29, 2013, the outstanding balance sheet hedging
derivatives had maturities of 180 days or less.
The fair value of derivative instruments on our Consolidated Balance Sheets as of November 28, 2014 and November 29,
2013 were as follows (in thousands):
2014 2013
Fair Value
Asset
Derivatives
Fair Value
Liability
Derivatives
Fair Value
Asset
Derivatives
Fair Value
Liability
Derivatives
Derivatives designated as hedging instruments:
Foreign exchange option contracts (1)(3) ................... $ 31,275 $ — $ 8,913 $ —
Interest rate swap (2) ................................................. 14,268 — — —
Derivatives not designated as hedging instruments:
Foreign exchange forward contracts (1) .................... 1,716 663 2,978 1,067
Total derivatives.......................................................... $ 47,259 $ 663 $ 11,891 $ 1,067
_________________________________________
(1) Included in prepaid expenses and other current assets and accrued expenses for asset derivatives and liability derivatives,
respectively, on our Consolidated Balance Sheets.
(2) Included in other assets on our Consolidated Balance Sheets.
(3) Hedging effectiveness expected to be recognized to income within the next twelve months.
The aggregate fair value of derivative instruments in net asset positions represent the maximum exposure to loss at the
reporting date as a result of all of the counterparties failing to perform as contracted. This exposure could be reduced by the fair
value of liabilities included in master netting arrangements with those same counterparties.