Eli Lilly 2007 Annual Report Download - page 58

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FINANCIALS
56
Note 14: Other Comprehensive Income (Loss)
The accumulated balances related to each component of other comprehensive income (loss) were as follows:
Defi ned Benefi t Effective Accumulated
Foreign Currency Unrealized Pension and Portion of Other
Translation Gains on Retiree Health Cash Flow Comprehensive
Gains Securities Benefi t Plans Hedges Income (Loss)
Beginning balance at January 1, 2007. . . . . . . . . . . $ 560.4 $20.0 $(1,803.3) $(165.8) $(1,388.7)
Other comprehensive income (loss) . . . . . . . . . . . . 756.6 (5.4) 651.7 (1.0) 1,401.9
Balance at December 31, 2007 . . . . . . . . . . . . . . . . . $1,317.0 $14.6 $ (1,151.6) $(166.8) $ 13.2
The amounts above are net of income taxes. The income taxes associated with the unrecognized losses and prior
service costs (Note 12) were an expense of $292.1 million for 2007. The income taxes related to the other com-
ponents 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 $5.8 million, $16.9 mil-
lion, and $9.1 million, net of tax, in 2007, 2006, and 2005, 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 $8.8 mil-
lion, $2.3 million, and $3.8 million, net of tax, in 2007, 2006, and 2005, respectively, for realized losses on foreign
currency options and $11.6 million, $17.1 million, and $21.4 million, net of tax, in 2007, 2006, and 2005, respectively,
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.