Crucial 2011 Annual Report Download - page 70

Accumulated Other Comprehensive Income (Loss)
Accumulated other comprehensive income (loss), net of tax, consisted of the following as of the end of the periods shown below:
Derivative Financial Instruments
We are exposed to currency exchange rate risk for monetary assets and liabilities held or denominated in foreign currencies, primarily the
euro, Singapore dollar and yen. We are also exposed to currency exchange rate risk for capital expenditures, primarily denominated in the euro
and yen. We use derivative instruments to manage our exposures to changes in currency exchange rates. For exposures associated with our
monetary assets and liabilities, our primary objective in entering into currency derivatives is to reduce the volatility that changes in currency
exchange rates have on our earnings. For exposures associated with capital expenditures, our primary objective in entering into currency
derivatives is to reduce the volatility that changes in currency exchange rates have on future cash flows.
Our derivatives consist primarily of currency forward contracts. The derivatives expose us to credit risk to the extent the counterparties may
be unable to meet the terms of the derivative instrument. Our maximum exposure to loss due to credit risk that we would incur if parties to
forward contracts failed completely to perform according to the terms of the contracts was equal to our carrying value of the forward contracts as
of September 1, 2011 , as listed in the tables below under fair values. We seek to mitigate such risk by limiting our counterparties to major
financial institutions and by spreading risk across multiple major financial institutions. In addition, we monitor the potential risk of loss with any
one counterparty resulting from this type of credit risk on an ongoing basis. We have the following currency risk management programs:
Currency Derivatives without Hedge Accounting Designation
We utilize a rolling hedge strategy with currency forward contracts that generally mature within 35 days to hedge our exposure to changes in
currency exchange rates. At the end of each reporting period, monetary assets and liabilities held or denominated in currencies other than the U.S.
dollar are remeasured in U.S. dollars and the associated outstanding forward contracts are marked-to-market. Currency forward contracts are
valued at fair values based on bid prices of dealers or exchange quotations (referred to as Level 2). Realized and unrealized currency gains and
losses on derivative instruments and the underlying monetary assets and liabilities are included in other operating income (expense). Total gross
notional amounts and fair values for currency derivatives without hedge accounting designation were as follows:
67
2011 2010
Accumulated translation adjustment, net
$
65
$
2
Gain (loss) on derivatives, net
43
1
Gain (loss) on investments, net
25
14
Unrecognized pension liability
(1
)
(6
)
Accumulated other comprehensive income (loss)
$
132
$
11