Invacare 2011 Annual Report Download - page 110

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INVACARE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Derivatives—Continued
The effect of derivative instruments on the Statement of Operations and Other Comprehensive Income
(OCI) 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, 2011
Foreign currency forward contracts .... $ 925 $ (250) $ (7)
Interest rate swap contracts ........... (370) — —
$ 555 $ (250) $ (7)
Year ended December 31, 2010
Foreign currency forward contracts .... $(2,530) $2,803 $ (134)
Interest rate swap contracts ........... — — —
$(2,530) $2,803 $ (134)
Derivatives not designated as hedging
instruments under ASC 815
Amount of Gain
(Loss) Recognized in Income on
Derivatives
Year ended December 31, 2011
Foreign currency forward contracts .... $ 83
Year ended December 31, 2010
Foreign currency forward contracts .... $3,800
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 2011, net sales were increased by $3,080,000 and cost of product sold was increased by $3,330,000
for a net realized loss of $250,000. In 2010, net sales were increased by $1,605,000 and cost of product sold was
decreased by $1,198,000 for a net realized gain of $2,803,000 compared to a net loss of $339,000 in 2009.
The company recognized net losses of $385,000 and $0 in 2011 and 2010, respectively related to interest
rate swap agreements which are reflected in interest expense on the consolidated statement of operations. Gains
of $83,000 and $3,800,000 were recognized in selling, general and administrative (SG&A) expenses in 2011 and
2010, respectively, on foreign currency forward contracts not designated as hedging instruments which were
offset by 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
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.
Level I inputs are quoted prices in active markets for identical assets or liabilities. Level II inputs are quoted
prices for similar assets or liabilities in active markets: quoted prices for identical or similar instruments in
markets that are not active; and model-derived valuations in which all significant inputs are observable in active
markets. Level III inputs are based on valuations derived from valuation techniques in which one or more
significant inputs are unobservable.
FS-38