Cardinal Health 2011 Annual Report Download - page 89

Income Taxes
S
ee Note 9
f
or
di
scuss
i
on o
f
cont
i
ngenc
i
es re
l
ate
d
to our
i
ncome taxes
.
1
1.
GU
ARANTEE
S
I
n the ordinary course of business, we agree to indemnify certain other parties under acquisition an
d
di
spos
i
t
i
on agreements, customer agreements,
i
nte
ll
ectua
l
property
li
cens
i
ng agreements, an
d
ot
h
er agreements.
Such indemnification obli
g
ations var
y
in scope and, when defined, in duration. In man
y
cases, a maximum
o
bligation is not explicitly stated, and therefore the overall maximum amount of the liability under suc
h
i
n
d
emn
ifi
cat
i
on o
bli
gat
i
ons cannot
b
e reasona
bl
y est
i
mate
d
.W
h
ere appropr
i
ate, suc
hi
n
d
emn
ifi
cat
i
on o
bli
gat
i
ons
a
re recorded as a liabilit
y
. Historicall
y
, we have not, individuall
y
or in the a
gg
re
g
ate, made pa
y
ments under thes
e
indemnification obligations in any material amounts. In certain circumstances, we believe that existing insuranc
e
a
rrangements, su
bj
ect to t
h
e genera
ld
e
d
uct
i
on an
d
exc
l
us
i
on prov
i
s
i
ons, wou
ld
cover port
i
ons o
f
t
h
e
li
a
bili
ty t
h
a
t
ma
y
arise from these indemnification obli
g
ations. In addition, we believe that the likelihood of a materia
l
l
iability being triggered under these indemnification obligations is not significant
.
We enter
i
nto agreements t
h
at o
bli
gate us to ma
k
e
fi
xe
d
payments upon t
h
e occurrence o
f
certa
i
n events.
Such obli
g
ations primaril
y
relate to obli
g
ations arisin
g
under acquisition transactions, where we have a
g
reed t
o
ma
k
e payments
b
ase
d
upon t
h
eac
hi
evement o
f
certa
i
n
fi
nanc
i
a
l
per
f
ormance measures
b
yt
h
e acqu
i
re
db
us
i
ness.
Genera
ll
y, t
h
eo
bli
gat
i
on
i
s cappe
d
at an exp
li
c
i
t amount. See Note 2
f
or
d
eta
il
regar
di
ng t
h
e P4 Hea
l
t
h
care
contin
g
ent consideration arran
g
ement.
1
2. FINANCIAL INSTRUMENT
S
We utilize derivative financial instruments to mana
g
e exposure to certain risks related to our on
g
oin
g
o
perations. The primary risks managed through the use of derivative instruments include interest rate risk,
currency exc
h
ange r
i
s
k
an
d
commo
di
ty pr
i
ce r
i
s
k
.We
d
o not use
d
er
i
vat
i
ve
i
nstruments
f
or tra
di
ng or
speculative purposes. While the ma
j
orit
y
of our derivative instruments are desi
g
nated as hed
g
in
g
instruments, we
a
lso enter into derivative instruments that are designed to hedge a risk, but are not designated as hedging
i
nstruments. T
h
ese
d
er
i
vat
i
ve
i
nstruments are a
dj
uste
d
to current
f
a
i
rva
l
ue t
h
roug
h
earn
i
ngs at t
h
een
d
o
f
eac
h
p
eriod.
Interest Rate Ris
k
Mana
g
ement.
W
e are expose
d
to t
h
e
i
mpact o
fi
nterest rate c
h
anges. Our o
bj
ect
i
ve
i
sto
mana
g
et
h
e
i
mpact o
fi
nterest rate c
h
an
g
es on cas
hfl
ows an
d
t
h
e mar
k
et va
l
ue o
f
our
b
orrow
i
n
g
s. We ut
ili
ze
a
mix of debt maturities alon
g
with both fixed-rate and variable-rate debt to mana
g
e chan
g
es in interest rates. I
n
addi
t
i
on, we enter
i
nto
i
nterest rate swaps to
f
urt
h
er manage our exposure to
i
nterest rate var
i
at
i
ons re
l
ate
d
to ou
r
b
orrow
i
ngs an
d
to
l
ower our overa
ll b
orrow
i
ng costs.
Currenc
y
Exchan
g
e Risk Mana
g
ement.
W
e conduct business in several ma
j
or international currencies an
d
a
re su
bj
ect to r
i
s
k
s assoc
i
ate
d
w
i
t
h
c
h
ang
i
ng
f
ore
i
gn exc
h
ange rates. Our o
bj
ect
i
ve
i
store
d
uce earn
i
ngs an
d
cas
h
fl
ow vo
l
at
ili
t
y
assoc
i
ate
d
w
i
t
hf
ore
ig
n exc
h
an
g
e rate c
h
an
g
es to a
ll
ow mana
g
ement to
f
ocus
i
ts attent
i
on on
business operations. Accordin
g
l
y
, we enter into various contracts that chan
g
e in value as forei
g
n exchan
g
e rates
c
h
ange to protect t
h
eva
l
ue o
f
ex
i
st
i
ng
f
ore
i
gn currency assets an
dli
a
bili
t
i
es, comm
i
tments an
d
ant
i
c
i
pate
d
f
ore
ig
n currenc
y
revenue an
d
expenses.
Commodit
y
Price Risk Mana
g
ement.
W
e are exposed to changes in the price of certain commodities. Our
obj
ect
i
ve
i
store
d
uce earn
i
ngs an
d
cas
hfl
ow vo
l
at
ili
ty assoc
i
ate
d
w
i
t
hf
orecaste
d
purc
h
ases o
f
t
h
es
e
commodities to allow mana
g
ement to focus its attention on business operations. Accordin
g
l
y
, we enter int
o
d
erivative contracts to manage the price risk associated with these forecasted purchases.
We are expose
d
to counterpart
y
cre
di
tr
i
s
k
on a
ll
o
f
our
d
er
i
vat
i
ve
i
nstruments. Accor
di
n
gly
,we
h
ave
established and maintain strict counterpart
y
credit
g
uidelines and enter into derivative instruments onl
y
with
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