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Newell Rubbermaid Inc. 2007 Annual Report
48
Foreign Currency Management
The Company utilizes forward exchange contracts and options to manage foreign exchange risk related to both known and anticipated intercompany
transactions and third-party commercial transaction exposures of approximately one year in duration or less. The effective portion of the changes in fair
value of these instruments is reported in other comprehensive income and reclassified into earnings in the same period or periods in which the hedged
transactions affect earnings. Any ineffective portion is immediately recognized in earnings.
The Company also utilizes long-term cross currency interest rate swaps to hedge long-term intercompany financing transactions. Gains and losses
related to qualifying forward exchange contracts, which hedge certain anticipated transactions are recognized in other comprehensive income as an asset
or liability until the underlying transaction occurs.
The asset or liability related to these transactions is recorded in the captions Prepaid expenses and other, Other assets, Other accrued liabilities or
Other noncurrent liabilities on the Consolidated Balance Sheet depending on the maturity of the Company’s cross currency interest rate swaps and forward
contracts at December 31, 2007 and 2006. The earnings impact of cash flow hedges relating to forecasted purchases of inventory is generally reported in
cost of products sold to match the underlying transaction being hedged. For hedged forecasted transactions, hedge accounting is discontinued if the forecasted
transaction is no longer probable of occurring, in which case previously deferred hedging gains or losses would be recorded to earnings immediately. The gains
and losses reported in accumulated other comprehensive income will be reclassified to earnings upon completion of the underlying transaction being hedged.
The fair value of foreign currency hedging instruments is recorded in the captions Prepaid expenses and other, Other assets, Other accrued liabilities or
Other noncurrent liabilities on the Consolidated Balance Sheets depending on the maturity of the Company’s cross currency interest rate swaps and forward
contracts at December 31, 2007 and 2006. The earnings impact of cash flow hedges relating to forecasted purchases of inventory is generally reported in cost
of products sold to match the underlying transaction being hedged. For hedged forecasted transactions, hedge accounting is discontinued if the forecasted
transaction is no longer probable of occurring, in which case previously deferred hedging gains or losses would be recorded to earnings immediately.
Disclosures about Fair Value of Financial Instruments
The Company’s financial instruments include cash and cash equivalents, accounts receivable, notes payable and short and long-term debt. The fair value
of these instruments approximates carrying values due to their short-term duration, except as follows:
Qualifying Derivative Instruments
The fair value of the Company’s qualifying derivative instruments is recorded in the Consolidated Balance Sheets and is described in more detail in Footnote 11.
Long-Term Debt
The fair values of the Company’s long-term debt issued under the medium-term note program and the junior convertible subordinated debentures are based
on quoted market prices and are as follows as of December 31, (in millions):
2007 2006
Medium-term note program $1,085.2 $1,321.7
Junior convertible subordinated debentures $ 390.7 $ 398.1
All other significant long-term debt is pursuant to floating rate instruments whose carrying amounts approximate fair value.
Foreign Currency Translation
Assets and liabilities of foreign subsidiaries are translated into U.S. dollars at the rates of exchange in effect at year-end. The related translation adjustments
are made directly to accumulated other comprehensive income. Income and expenses are translated at the average monthly rates of exchange in effect
during the year. Gains and losses from foreign currency transactions of these subsidiaries are included in net income. International subsidiaries operating
in highly inflationary economies translate nonmonetary assets at historical rates, while net monetary assets are translated at current rates, with the
resulting translation adjustment included in net income as other expense (income), net.