Invacare 2015 Annual Report Download - page 111

Download and view the complete annual report

Please find page 111 of the 2015 Invacare annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 140

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140

INVACARE CORPORATION AND SUBSIDIAIRIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
FS-39
The company recognizes its derivative instruments as assets or liabilities in the consolidated balance sheet measured at fair
value. A majority of the company’s derivative instruments are designated and qualify as cash flow hedges. Accordingly, the effective
portion of the gain or loss on the derivative instrument is reported as a component of other comprehensive income and reclassified
into earnings in the same period or periods during which the hedged transaction affects earnings. The remaining gain or loss on
the derivative instrument in excess of the cumulative change in the fair value of the hedged item, if any, is recognized in current
earnings during the period of change.
During a portion of 2014 and all of 2013, the company was a party to interest rate swap agreements that qualified as cash
flow hedges and effectively converted floating-rate debt to fixed-rate debt, so the company could avoid the risk of changes in
market interest rates. The gains or losses on interest rate swaps are reflected in interest expense on the consolidated statement of
comprehensive income (loss).
To protect against increases/decreases in forecasted foreign currency cash flows resulting from inventory purchases/sales
over the next year, the company utilizes foreign currency forward contracts to hedge portions of its forecasted purchases/sales
denominated in foreign currencies. The gains and losses are included in cost of products sold and selling, general and administrative
expenses on the consolidated statement of comprehensive income (loss). If it is later determined that a hedged forecasted transaction
is unlikely to occur, any prospective gains or losses on the forward contracts would be recognized in earnings. The company does
not expect any material amount of hedge ineffectiveness related to forward contract cash flow hedges during the next twelve
months.
The company has historically not recognized any material amount of ineffectiveness related to forward contract cash flow
hedges because the company generally limits its hedges to between 50% and 90% of total forecasted transactions for a given
entity’s exposure to currency rate changes and the transactions hedged are recurring in nature. Furthermore, the majority of the
hedged transactions are related to intercompany sales and purchases for which settlement occurs on a specific day each month.
Forward contracts with a total notional amount in USD of $136,818,000 and $157,121,000 matured during the twelve months
ended December 31, 2015 and 2014, respectively.