Invacare 2009 Annual Report Download - page 103

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INVACARE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Derivatives—Continued
derivative instruments designated and qualifying as fair value hedges, the gain or loss on the derivative
instrument as well as the offsetting gain or loss on the hedged item associated with the hedged risk are
recognized in the same line item associated with the hedged item in earnings.
Derivatives Not Qualifying or Designated for Hedge Accounting Treatment
The company utilizes foreign currency forward or option contracts that do not qualify for hedge accounting
treatment in an attempt to manage the risk associated with the conversion of earnings in foreign currencies into
U.S. Dollars. While these derivative instruments do not qualify for hedge accounting treatment in accordance
with ASC 815, these derivatives do provide the company with a means to manage the risk associated with
currency translation. These instruments are recorded at fair value in the consolidated balance sheet and any gains
or losses are recorded as part of earnings in the current period. No such contracts were outstanding at
December 31, 2009 and a loss of $68,000 was recorded by the company for the year ended December 31, 2009
related to derivatives not qualifying for hedge accounting treatment.
The company also utilizes foreign currency forward contracts that are not designated as hedges in
accordance with ASC 815 although they could qualify for hedge accounting treatment. These contracts are
entered into to eliminate the risk associated with the settlement of short-term intercompany trading receivables
and payables between Invacare Corporation and its foreign subsidiaries. The currency forward contracts are
entered into at the same time as the intercompany receivables or payables are created so that upon settlement, the
gain/loss on the settlement is offset by the gain/loss on the foreign currency forward contract. Accordingly, no
material net gain or loss was realized by the company for the year ended December 31, 2009 related to these
forward contracts and the associated short-term intercompany trading receivables and payables.
As of December 31, 2009, foreign exchange forward contracts not qualifying or designated for hedge
accounting treatment entered into in 2009 and outstanding were as follows (in thousands USD):
Notional
Amount
Gain
(Loss)
CAD/USD .................................................................. $ 2,194 $ (3)
CHF/USD .................................................................. 1,102 (39)
DKK/USD.................................................................. 7,580 (77)
GBP/USD .................................................................. 3,304 (73)
NZD/USD .................................................................. 1,756 59
SEK/USD .................................................................. 9,899 (126)
EUR/NZD .................................................................. 7,457 (324)
$33,292 $(583)
As of December 31, 2009, the fair values of the company’s derivative instruments were as follows (in
thousands):
Assets Liabilities
Derivatives designated as hedging instruments under ASC 815
Foreign currency forward contracts .............................................. $1,815 $1,498
Derivatives not designated as hedging instruments under ASC 815
Foreign currency forward contracts .............................................. 92 675
Total derivatives ............................................................. $1,907 $2,173
FS-35