Invacare 2012 Annual Report Download - page 124

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INVACARE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
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.
The following table provides a summary of the company’s assets and liabilities that are measured on a
recurring basis (in thousands).
Basis for Fair Value Measurements at Reporting Date
Quoted Prices
in Active
Markets
for Identical
Assets /
(Liabilities)
Significant
Other
Observable
Inputs
Significant
Other
Unobservable
Inputs
Total Level I Level II Level III
December 31, 2012:
Forward Exchange
Contracts—net ............. $ 5 — $ 5 —
Interest Rate Swap
Agreements—net ........... (316) — (316) —
December 31, 2011:
Forward Exchange
Contracts—net ............. $ 1,180 — $ 1,180 —
Interest Rate Swap
Agreements—net ........... (370) — (370) —
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, MXP, 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 gain
of $3,763,000 in 2012, a net loss of $250,000 in 2011 and a net gain of $2,803,000 in 2010 on ASC 815
designated derivatives. 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, sales for hedges of forecasted sales 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.
FS-44