International Paper 2015 Annual Report Download - page 86

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69
The following table shows gains or losses recognized
in AOCI, net of tax, related to derivative instruments:
Gain (Loss)
Recognized in AOCI on Derivatives
(Effective Portion)
In millions 2015 2014 2013
Foreign exchange
contracts $(3)$10$—
Total $(3)$10$—
During the next 12 months, the amount of the
December 31, 2015 AOCI balance, after tax, that is
expected to be reclassified to earnings is a gain of $3
million.
The amounts of gains and losses recognized in the consolidated statement of operations on qualifying and non-
qualifying financial instruments used in hedging transactions were as follows:
Gain (Loss)
Reclassified from
AOCI
into Income
(Effective Portion)
Location of Gain
(Loss)
Reclassified
from AOCI
into Income
(Effective Portion)
In millions 2015 2014 2013
Derivatives in Cash Flow Hedging Relationships:
Foreign exchange contracts $(12)$ 4 $ 7 Cost of products sold
Total $ (12) $4$ 7
Gain (Loss)
Recognized
in Income
Location of Gain
(Loss)
in Consolidated
Statement of
Operations
In millions 2015 2014 2013
Derivatives in Fair Value Hedging Relationships:
Interest rate contracts $3 $ 1 $ (1) Interest expense, net
Debt (3) (1) 1 Interest expense, net
Total $— $— $—
Derivatives Not Designated as Hedging Instruments:
Electricity Contracts $(7) $ (2) $ 4 Cost of products sold
Embedded derivatives —— (1) Interest expense, net
Foreign exchange contracts (4) (1) (5) Cost of products sold
Interest rate contracts 13 (a) 12 (b) 21 Interest expense, net
Total $2 $9 $19
(a) Excluding gain of $3 million related to debt reduction recorded to Restructuring and other charges.
(b) Excluding gain of $7 million, net related to debt issuance and debt reduction recorded to Restructuring and other charges.
The following activity is related to fully effective interest rate swaps designated as fair value hedges:
2015 2014
In millions Issued Terminated Undesignated Issued Terminated Undesignated
Second Quarter $ — $ 175 $ 38 $—$ —$ —
First Quarter —— —55 — —
Total $ — $ 175 $ 38 $55$ — $ —
Fair Value Measurements
International Paper’s financial assets and liabilities that
are recorded at fair value consist of derivative contracts,
including interest rate swaps, foreign currency forward
contracts, and other financial instruments that are used
to hedge exposures to interest rate, commodity and
currency risks. In addition, a consolidated subsidiary of
International Paper has an embedded derivative. For
these financial instruments and the embedded
derivative, fair value is determined at each balance
sheet date using an income approach.
The guidance for fair value measurements and
disclosures sets out a fair value hierarchy that groups