Crucial 2014 Annual Report Download - page 83

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81
Realized and unrealized gains and losses on currency derivatives without hedge accounting designation as well as the
change in the underlying monetary assets and liabilities due to changes in currency exchange rates are included in other non-
operating income (expense).
Interest Rate Swaps: As of August 29, 2013 we were party to interest rate swap contracts scheduled to mature in August
2017 to hedge against the variability of future interest payments due on variable-rate debt, which effectively converted the
variable-rate debt to fixed-rate debt. We designated 80% of the swaps as cash flow hedges and the remaining 20% were not
designated for hedge accounting treatment. On August 27, 2014, we repaid the remaining carrying value of $252 million of the
note prior to its scheduled maturity and terminated the interest rate swaps.
Convertible Notes Settlement Obligations: In connection with our debt restructure activities in 2014, holders elected to
convert substantially all of the outstanding 2014 Notes, 2027 Notes, 2031A Notes and 2031B Notes. As a result of our
elections to settle the conversion amounts in cash, each of the settlement obligations became derivative debt liabilities subject
to mark-to-market accounting treatment for a period of approximately 30 days, beginning on the date we notified the holder of
our intention to settle the obligation in cash through the settlement date. The fair values of the underlying derivative settlement
obligations were initially determined using the Black-Scholes option valuation model (Level 2 fair value measurements). The
Black-Scholes model requires the input of assumptions, including the stock price, expected stock-price volatility, estimated
option life, risk-free interest rate and dividend rate. The subsequent measurements and final settlement amounts of our
convertible notes settlement obligations were based on the volume-weighted average stock price (Level 1 fair value
measurements). Changes in fair values of the derivative settlement obligations were included in other non-operating income
(expense), net.
Total gross notional amounts and fair values for derivative instruments without hedge accounting designation were as
follows:
Notional
Amount(1)
Fair Value of
Current
Assets(2) Noncurrent
Assets(3) Current
Liabilities(4) Noncurrent
Liabilities(5)
As of August 28, 2014
Currency forward contracts:
Yen $ 554 $ — $ — $ (12) $ (6)
Singapore dollar 330 — — — —
Euro 245 — — (1) —
Shekel 62 — — (1) —
$ 1,191
Convertible notes settlement obligations 12 — — (389) —
$ — $ — $ (403) $ (6)
As of August 29, 2013
Currency forward contracts:
Yen $ 336 $ 1 $ 3 $ — $ —
Singapore dollar 218 — — — —
Euro 217 1 — (1) —
Shekel 78 — — (1) —
Interest rate swap contracts 62 — — — —
Currency options - New Taiwan dollar 351 — — — —
$ 1,262 $ 2 $ 3 $ (2) $ —
(1) Notional amounts of forward, option and interest rate swap contracts in U.S. dollars and convertible notes settlement
obligations in shares.
(2) Included in receivables - other.
(3) Included in other noncurrent assets.
(4) Included in accounts payable and accrued expenses - other for forward, option and interest rate swap contracts and in
current debt for convertible notes settlement obligations.
(5) Included in other noncurrent liabilities.