First Data 2013 Annual Report Download - page 76

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The following table presents maturity information for the Company’s investments in debt securities as of December 31, 2013:
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Due within one year $ 71.2
Due after one year through five years 3.5
Due after five years through 10 years —
Due after 10 years 9.3
Total debt securities $84.0
The Company also maintained investments in non-marketable securities, held for strategic purposes (collectively referred to as “cost method
investments”) which are carried at cost and included in “Other long-term assets” in the Company’s Consolidated Balance Sheets. These investments are
evaluated for impairment upon an indicator of impairment such as an event or change in circumstances that may have a significant adverse effect on the fair
value of the investment. As of December 31, 2013, there were no indicators of impairment. During the third quarter of 2012, the Company recognized an
impairment of $8.7 million related to a cost method investment due to uncertainty regarding the investee’s viability as a going concern. Where there are no
indicators of impairment present, the Company estimates the fair value for the cost method investments only if it is practicable to do so. As of December 31,
2013, it was deemed impracticable to estimate the fair value on $3.6 million of cost method assets due to the lack of sufficient data upon which to develop a
valuation model and the costs of obtaining an independent valuation in relation to the size of the investments.
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The Company is exposed to various financial and market risks, including those related to changes in interest rates and foreign currency exchange rates,
that exist as part of its ongoing business operations. The Company utilizes certain derivative financial instruments to enhance its ability to manage these risks.
The Company uses derivative instruments (i) to mitigate cash flow risks with respect to changes in interest rates (forecasted interest payments on
variable rate debt), (ii) to maintain a desired ratio of fixed rate and floating rate debt, and (iii) to protect the net investment in certain foreign subsidiaries and/or
affiliates and intercompany loans with respect to changes in foreign currency exchange rates.
Derivative instruments are entered into for periods consistent with related underlying exposures and do not constitute positions independent of those
exposures. The Company applies strict policies to manage each of these risks, including prohibition against derivatives trading, derivatives market-making or
any other speculative activities. Although most of the Company’s derivatives do not qualify for hedge accounting, they are maintained for economic hedge
purposes and are not considered speculative.
The Company’s policy is to manage its cash flow and net investment exposures related to adverse changes in interest rates and foreign currency
exchange rates. The Company’s objective is to engage in risk management strategies that provide adequate downside protection.
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With respect to derivative instruments that are afforded hedge accounting, the effective portion of changes in the fair value of a derivative that is
designated as a cash flow hedge is recorded in OCI and reclassified into earnings in the same period or periods during which the hedged transaction affects
earnings. Changes in the fair value of a net investment hedge that qualifies for hedge accounting are recorded as part of the cumulative translation adjustment
in OCI to the extent the hedge is effective. Any ineffectiveness associated with designated cash flow hedges, as well as any change in the fair value of a
derivative that is not designated as a hedge, is recorded immediately in “Other income (expense)” in the Consolidated Statements of Operations.
The Company formally documents all relationships between hedging instruments and the underlying hedged items, as well as its risk management
objective and strategy for undertaking various hedge transactions. This process includes linking all derivatives that have been designated as cash flow hedges
to forecasted transactions and net investment hedges to the underlying investment in a foreign subsidiary or affiliate. The Company formally assesses, both at
inception of the hedge and on an ongoing basis, whether the hedge is highly effective in offsetting changes in cash flows or foreign currency exposure of the
underlying hedged items. The
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