CDW 2012 Annual Report Download - page 76
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Table of Contents CDW CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Loan. The Company continued to report the net loss related to the discontinued cash flow hedges in accumulated other comprehensive
loss, which was reclassified into earnings on a straight-line basis through January 14, 2011.
There was no
loss reclassified into earnings during the year ended December 31, 2012. The amount of the loss reclassified into earnings
during the years ended December 31, 2011 and 2010 was $2.1 million and $38.2 million , respectively.
The Company utilized the hypothetical derivative method to measure hedge ineffectiveness each period for interest rate swaps
designated as cash flow hedges and recorded any ineffectiveness directly in interest expense, net . The Com pany recognized no gains
or losses due to hedge ineffectiveness during the years ended December 31, 2012 and 2011, respectively. The Company recognized a
net non-cash gain of $62.2 million due to hedge ineffectiveness during the year ended December 31, 2010.
The following table summarizes the classification and fair value amounts of derivative instruments reported in the consolidated balance
sheets as of December 31, 2012 and 2011 :
Derivative instruments carried at fair value as of December 31, 2012 were classified in the fair value hierarchy as follows:
The fair value of the Company’s interest rate caps is classified as Level 2 in the hierarchy. The valuation of the interest rate cap
agreements is derived by using a discounted cash flow analysis on the expected cash receipts that would occur if variable interest rates
rise above the strike rate of the caps. This analysis reflects the contractual terms of the cap agreements, including the period to maturity,
and uses observable market-based inputs, including LIBOR curves and implied volatilities. The Company also incorporates credit
valuation adjustments to appropriately reflect the respective counterparty’s nonperformance risk in the fair value measurements. The
counterparty credit spreads are based on publicly available credit information obtained from a third party credit data provider.
70
(in millions) Balance Sheet Location
Derivative Assets
Derivative
Liabilities
December 31,
December 31,
2012
2011
2012
2011
Derivatives not designated as hedging
instruments
Interest rate cap agreements Other assets
$
0.1
$
0.7
$
—
$
—
(in millions)
Level 1
Level 2
Level 3
Total
Interest rate cap agreements
$
—
$
0.1
$
—
$
0.1