Dow Chemical 2009 Annual Report Download - page 144

Table of Contents
Net Foreign Investment Hedges
For derivative instruments that are designated and qualify as net foreign investment hedges, the effective portion of the gain or loss on the derivative is included
in “Cumulative Translation Adjustments” in AOCI. The results of hedges of the Company’s net investment in foreign operations included in “Cumulative
Translation Adjustments” in AOCI was a net loss of $56 million after tax at December 31, 2009 (net gain of $36 million after tax at December 31, 2008).
During 2009, 2008 and 2007 there was no material impact on the consolidated financial statements due to hedge ineffectiveness. At December 31, 2009 and
2008, the Company had no open forward contracts or outstanding options to buy, sell or exchange foreign currencies. At December 31, 2009, the Company
had outstanding foreign-currency denominated debt designated as a hedge of net foreign investment of $1,879 million ($1,267 million at December 31, 2008).
Other Derivative Instruments
The Company utilizes futures, options and swap instruments that are effective as economic hedges of commodity price exposures, but do not meet the hedge
accounting criteria in the accounting guidance for derivatives and hedging. At December 31, 2009 and 2008, the Company had the following aggregate
notionals of outstanding commodity contracts:
Commodity 2009 2008 Notional Volume Unit
Ethane 0.9 - million barrels
Natural Gas 2.8 -
million million British thermal
units
The Company also uses foreign exchange forward contracts, options, and cross-currency swaps that are not designated as hedging instruments
primarily to manage foreign currency and interest rate exposure. The Company had open foreign exchange contracts with various expiration dates to buy, sell
or exchange foreign currencies with a U.S. dollar equivalent of $15,312 million at December 31, 2009 ($10,799 million at December 31, 2008).
The following table provides the fair value and gross balance sheet classification of derivative instruments:
Fair Value of Derivative Instruments at December 31
In millions Balance Sheet Classification 2009 2008
Asset Derivatives
Derivatives designated as hedges:
Foreign currency Accounts and notes receivable – Other $ 4 $ 77
Commodities Accounts and notes receivable – Other 4 68
Total derivatives designated as hedges $ 8 $ 145
Derivatives not designated as hedges:
Foreign currency Accounts and notes receivable – Other $ 125 $ 235
Commodities Accounts and notes receivable – Other 28 63
Total derivatives not designated as hedges $ 153 $ 298
Total asset derivatives $ 161 $ 443
Liability Derivatives
Derivatives designated as hedges:
Foreign currency Accounts payable – Other $ 3 $ 69
Commodities Accounts payable – Other - 262
Commodities Other noncurrent obligations - 22
Total derivatives designated as hedges $ 3 $ 353
Derivatives not designated as hedges:
Foreign currency Accounts payable – Other $ 65 $ 284
Commodities Accounts payable – Other 42 61
Total derivatives not designated as hedges $ 107 $ 345
Total liability derivatives $ 110 $ 698
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