Invacare 2009 Annual Report Download - page 104

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INVACARE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Derivatives—Continued
The fair values of the company’s foreign currency forward assets and liabilities are included in Other
Current Assets and Accrued Expenses, respectively in the Consolidated Balance Sheets. 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. For the year ended December 31, 2009, no swaps
were outstanding.
The effect of derivative instruments on the Statement of Operations and Other Comprehensive Income
(OCI) for the year ended December 31, 2009 was as follows (in thousands):
Derivatives in ASC 815 cash flow hedge
relationships
Amount of Gain
(Loss) Recognized in
OCI on Derivatives
(Effective Portion)
Amount of Gain (Loss)
Reclassified from
Accumulated OCI into
Income (Effective
Portion)
Amount of Gain (Loss)
Recognized in Income on
Derivatives (Ineffective Portion
and Amount Excluded from
Effectiveness Testing)
Year ended December 31
Foreign currency forward contracts ..... $ 962 $ (339) $ —
Interest rate swap contracts ............ 5,556 (2,819) —
$6,518 $(3,158) $ —
Derivatives not designated as hedging
instruments under ASC 815
Amount of Gain
Recognized in Income on
Derivatives
Year ended December 31
Foreign currency forward contracts ..... $2,899
The gains or losses recognized as the result of the settlement of cash flow hedge foreign currency forward
contracts are recognized in net sales for hedges of inventory sales or cost of product sold for hedges of inventory
purchases. In 2009, net sales were increased by $3,093,000 and cost of product sold was increased by $3,432,000
for a net realized loss of $338,000 compared to a net loss of $26,000 in 2008 and a net gain of $451,000 in 2007.
The company recognized net losses of $2,819,000, $2,684,000 and $394,000 in 2009, 2008 and 2007,
respectively related to interest rate swap agreements which are reflected in interest expense on the consolidated
statement of operations. A $2,899,000 gain was recognized in selling, general and administrative (SG&A)
expenses in 2009 on foreign currency forward contracts not designated as hedging instruments which was offset
by gains/losses of comparable amounts also recorded in SG&A expenses on the intercompany trade payables for
which the derivatives were entered into to offset.
Fair Values of Financial Instruments
The company adopted FAS 157 as of January 1, 2008 for assets and liabilities measured at fair value on a
recurring basis and the adoption had no material impact on the company’s financial position, results of operations
or cash flows. For assets and liabilities measured at fair value on a nonrecurring basis, such as goodwill and
intangibles, the company deferred its adoption until January 1, 2009, as allowed under the provisions of FAS
157. The adoption of FAS 157 for assets and liabilities measured at fair value on a nonrecurring basis had no
material impact on the company’s financial position, results of operations or cash flows.
Pursuant to ASC 820, the inputs used to derive the fair value of assets and liabilities are analyzed and
assigned a level I, II or III priority, with level I being the highest and level III being the lowest in the hierarchy.
FS-36