Equifax 2015 Annual Report Download - page 51

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comprehensive income, a component of shareholders’ equity. We also record gains and losses resulting from the translation of
intercompany balances of a long-term investment nature in accumulated other comprehensive loss. In the year ended
December 31, 2015, we recorded $2.0 million of foreign currency transaction gains. In the year ended December 31, 2014 and
December 31, 2013, we recorded $7.0 million and $6.8 million of foreign currency transaction losses, respectively.
Financial Instruments. Our financial instruments consist primarily of cash and cash equivalents, accounts and notes
receivable, accounts payable and short and long-term debt. The carrying amounts of these items, other than long-term debt,
approximate their fair market values due to the short-term nature of these instruments. The fair value of our fixed-rate debt is
determined using Level 2 inputs such as quoted market prices for publicly traded instruments, and for non-publicly traded
instruments through valuation techniques depending on the specific characteristics of the debt instrument, taking into account
credit risk. As of December 31, 2015 and 2014, the fair value of our fixed-rate debt was $1.2 billion and $1.3 billion,
respectively, compared to its carrying value of $1.1 billion and $1.1 billion, respectively, based on recent trading prices.
Derivatives and Hedging Activities. Although derivative financial instruments are not utilized for speculative
purposes or as the Company’s primary risk management tool, derivatives have been used as a risk management tool to hedge
the Company’s exposure to changes in interest rates and foreign exchange rates. We have used interest rate swaps and interest
rate lock agreements to manage interest rate risk associated with our fixed and floating-rate borrowings. Forward contracts on
various foreign currencies have been used to manage the foreign currency exchange rate risk of certain firm commitments
denominated in foreign currencies. We recognize all derivatives on the balance sheet at fair value. Derivative valuations reflect
the value of the instrument including the value associated with any material counterparty risk.
EconomicHedges. In December 2015, in anticipation of the Veda acquisition, we purchased foreign currency options
to buy Australian dollars with a weighted average strike price of $0.7225 and a notional value of 1.0 billion Australian dollars.
These foreign currency options ("options") were designed to act as economic hedges for the pending Veda acquisition and have
been marked to market. The options have an expiry date of February 18, 2016, and are reflected in other current assets, net, on
our Consolidated Balance Sheet. We recorded a mark-to-market gain on the options of $4.7 million for the year ended
December 31, 2015, which was recorded in other income (expense), net. The fair value of these options at December 31, 2015
were $14.4 million, recorded in other current assets, net, on our Consolidated Balance Sheet. In January 2016, we purchased
additional options for a notional amount of 1.0 billion Australian dollars, with a weighted average strike price of $0.7091, with
expiry dates of February 11, 2016 and February 16, 2016. We closed out all of the options on the respective settlement dates in
February 2016. We recognized a net loss of $15.4 million related to the options in the first quarter of 2016, which was recorded
in other income (expense), net.
FairValueHedges. In conjunction with our fourth quarter 2009 sale of five-year Senior Notes, we entered into five-
year interest rate swaps, designated as fair value hedges, which convert the debt’s fixed interest rate to a variable rate. These
swaps involve the receipt of fixed rate amounts for floating interest rate payments over the life of the swaps without exchange
of the underlying principal amount. Changes in the fair value of the interest rate swaps offset changes in the fair value of the
fixed-rate Senior Notes they hedge due to changes in the designated benchmark interest rate and are recorded in interest
expense. We settled the interest rate swaps on their maturity date during the fourth quarter of 2014, with receipt of $3.8 million
from the counterparties. There was no ineffectiveness on our fair value hedge that impacted 2014 earnings.
CashFlowHedges. Changes in the fair value of highly effective derivatives designated as cash flow hedges are
initially recorded in accumulated other comprehensive income and are reclassified into the line item in the Consolidated
Statements of Income in which the hedged item is recorded in the same period the hedged item impacts earnings. Any
ineffective portion is recorded in current period earnings. We did not have any unsettled cash flow hedges outstanding as of
December 31, 2015 or December 31, 2014.
Fair Value Measurements. Fair value is determined based on the assumptions marketplace participants use in
pricing the asset or liability. We use a three level fair value hierarchy to prioritize the inputs used in valuation techniques
between observable inputs that reflect quoted prices in active markets, inputs other than quoted prices with observable market
data and unobservable data (e.g., a company’s own data). The adoption of fair value guidance for nonfinancial assets and
nonfinancial liabilities on January 1, 2009 did not have a material impact on our Consolidated Financial Statements.
The following table presents assets and liabilities measured at fair value on a recurring basis:
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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