Eli Lilly 2006 Annual Report Download - page 54

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FINANCIALS
52
Environmental Matters
Under the Comprehensive Environmental Response, Compensation, and Liability Act, commonly known as
Superfund, we have been designated as one of several potentially responsible parties with respect to fewer than
10 sites. Under Superfund, each responsible party may be jointly and severally liable for the entire amount of
the cleanup. We also continue remediation of certain of our own sites. We have accrued for estimated Superfund
cleanup costs, remediation, and certain other environmental matters. This takes into account, as applicable, avail-
able information regarding site conditions, potential cleanup methods, estimated costs, and the extent to which
other parties can be expected to contribute to payment of those costs. We have reached a settlement with our li-
ability insurance carriers providing for coverage for certain environmental liabilities.
Note 14: Other Comprehensive Income (Loss)
The accumulated balances related to each component of other comprehensive income (loss) were as follows:
Foreign Unrealized Minimum Effective Accumulated
Currency Gains Pension Adoption Portion of Other
Translation on Liability of Cash Flow Comprehensive
Gains Securities Adjustment SFAS 158 Hedges Loss
Beginning balance at January 1, 2006. . . . $ 18.0 $19.7 $(202.9) $ — $(255.4) $ (420.6)
Other comprehensive income (loss) . . . . . 542.4 0.3 (11.7) (1,588.7) 89.6 (968.1)
Balance at December 31, 2006 . . . . . . . . . . $560.4 $20.0 $(214.6) $(1,588.7) $(165.8) $(1,388.7)
The amounts above are net of income taxes. The income taxes associated with the adoption of SFAS 158 (Note
12) were a benefi t of $777.5 million. The income taxes related to the other components of comprehensive income
were not signifi cant, as income taxes were not provided for foreign currency translation.
The unrealized gains (losses) on securities is net of reclassifi cation adjustments of $16.9 million, $9.1 mil-
lion, and $9.8 million, net of tax, in 2006, 2005, and 2004, respectively, for net realized gains on sales of securities
included in net income. The effective portion of cash fl ow hedges is net of reclassifi cation adjustments of $2.3 mil-
lion, $3.8 million, and $23.1 million, net of tax, in 2006, 2005, and 2004, respectively, for realized losses on foreign
currency options and $17.1 million, $21.4 million, and $15.6 million, net of tax, in 2006, 2005, and 2004, respective-
ly, for interest expense on interest rate swaps designated as cash fl ow hedges.
Generally, the assets and liabilities of foreign operations are translated into U.S. dollars using the current
exchange rate. For those operations, changes in exchange rates generally do not affect cash fl ows; therefore,
resulting translation adjustments are made in shareholders’ equity rather than in income.