Invacare 2008 Annual Report Download - page 102

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INVACARE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Fair Values of Financial Instruments—Continued
based on pricing models in which all significant inputs, such as interest rates and yield curves, are observable in
active markets. The company believes that the fair values reported would not be materially different from the
amounts that would be realized upon settlement.
The gains and losses that result from the company’s current cash flow hedge interest rate swaps are
recognized as part of interest expense. Swap assets are recorded in either Other Current Assets or Other Assets,
while swap liabilities are recorded in Accrued Expenses or Other Long-Term Obligations in the Consolidated
Balance Sheets.
Forward Contracts: The company operates internationally and as a result is exposed to foreign currency
fluctuations. Specifically, the exposure includes intercompany loans and third party sales or payments. In an
attempt to reduce this exposure, foreign currency forward contracts are utilized and accounted for as hedging
instruments. The forward contracts are used to hedge the following currencies: AUD, CAD, CHF, CNY, DKK,
EUR, GBP, NOK, NZD, SEK and USD. The company does not use derivative financial instruments for
speculative purposes. Fair values for the company’s foreign exchange forward contracts are based on quoted
market prices for contracts with similar maturities.
The gains and losses that result from the majority of the forward contracts are deferred and recognized when
the offsetting gains and losses for the identified transactions are recognized. The company recognized a net loss
of $26,000 in 2008, a net gain of $451,000 in 2007 and a net loss of $240,000 in 2006. Gains or losses
recognized as the result of the settlement of forward contracts are recognized in cost of products sold for hedges
of inventory transactions or selling, general and administrative expenses for other hedged transactions. The
company’s forward contracts are included in Other Current Assets or Accrued Expenses in the Consolidated
Balance Sheets.
The company’s forward contract hedged positions were as follows as of December 31, 2008 (in thousands):
Notional
Amount
Unrealized
Gain (Loss)
EUR/USD............................................................... $20,478 $(1,194)
AUD/USD .............................................................. 7,062 (405)
EUR/GBP ............................................................... 3,230 645
EUR/NZD............................................................... 4,752 (489)
NZD/USD............................................................... 7,331 (276)
Total .................................................................... $42,853 $(1,719)
FS-36