Harman Kardon 2011 Annual Report Download - page 88

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At June 30, 2011 and 2010, we had outstanding foreign exchange contracts, including forward and option
contracts, which are summarized below:
June 30, 2011 June 30, 2010
Gross Notional
Value
Fair Value
Asset/
(Liability)(1)
Gross Notional
Value
Fair Value
Asset/
(Liability)(1)
Currency Hedged (Buy/Sell):
U.S. Dollar/Euro .................... $612,400 $(33,760) $511,600 $25,852
Swiss Franc/U.S. Dollar .............. 41,647 516 13,922 922
British Pound/U.S. Dollar ............ 20,700 (152) 0 0
British Pound/Swiss Franc ............ 15,408 (574) 0 0
Euro/British Pound .................. 11,604 163 7,343 (32)
U.S. Dollar/Brazilian Real ............ 10,400 (1,249) 0 0
U.S. Dollar/British Pound ............ 8,500 (76) 2,250 (52)
Chinese Yuan/U.S. Dollar ............ 6,188 84 0 0
Euro/U.S. Dollar .................... 8,200 146 1,378 (123)
U.S. Dollar/Japanese Yen ............ 900 (22) 900 (55)
Japanese Yen/Euro .................. 0 0 6,786 137
Swiss Franc/Euro ................... 0 0 9,282 772
Swedish Krona/Euro ................ 0 0 5,389 7
Danish Krone/Euro .................. 0 0 1,150 10
Total ............................. $735,947 $(34,924) $560,000 $27,438
(1) Represents the net receivable/(payable) included in our Consolidated Balance Sheets.
Cash Flow Hedges
We designate a portion of our foreign exchange contracts as cash flow hedges of foreign currency
denominated purchases. As of June 30, 2011 and June 30, 2010, we had $528.4 million and $511.6 million of
forward and option contracts maturing through June 2012 and June 2011, respectively. These contracts are
recorded at fair value in the accompanying Consolidated Balance Sheets. The changes in fair value for these
contracts on a spot to spot basis are reported in AOCI and are reclassified to either Cost of sales or SG&A,
depending on the nature of the underlying asset or liability that is being hedged, in our Consolidated Statements
of Operations, in the period or periods during which the underlying transaction occurs. If it becomes apparent
that an underlying forecasted transaction will not occur, the amount recorded in AOCI related to the hedge is
reclassified to Miscellaneous, net, in our Consolidated Statements of Operations, in the then-current
period. Amounts relating to such reclassifications were immaterial for the years ended June 30, 2011, 2010 and
2009.
Changes in the fair value of the derivatives are highly effective in offsetting changes in the cash flows of the
hedged items because the amounts and the maturities of the derivatives approximate those of the forecasted
exposures. Any ineffective portion of the derivative is recognized in the current period in our Consolidated
Statements of Operations, in the same line item in which the foreign currency gain or loss on the underlying
hedged transaction was recorded. We recognized less than $0.1 million of ineffectiveness in our Consolidated
Statements of Operations for each of the fiscal years ended June 30, 2011, 2010 and 2009 and all components of
each derivative’s gain or loss, with the exception of forward points (see below), were included in the assessment
of hedge ineffectiveness. At June 30, 2011 and 2010, the fair value of these contracts was a net liability of $25.2
million and a net asset of $21.5 million, respectively. The amount associated with these hedges that is expected
to be reclassified from AOCI to earnings within the next 12 months is a loss of $29.4 million.
We elected to exclude forward points from the effectiveness assessment. At the end of the reporting period
we calculate the excluded amount, which is the fair value relating to the change in forward points that is recorded
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