Kimberly-Clark 2008 Annual Report Download - page 66

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KIMBERLY-CLARK CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Derivative Instruments and Hedging
All derivative instruments are recorded as assets or liabilities on the balance sheet at fair value. Changes in
the fair value of derivatives are either recorded in the income statement or other comprehensive income, as
appropriate. The gain or loss on derivatives designated as fair value hedges and the offsetting loss or gain on the
hedged item attributable to the hedged risk are included in income in the period that changes in fair value occur.
The effective portion of the gain or loss on derivatives designated as cash flow hedges is included in other
comprehensive income in the period that changes in fair value occur and is reclassified to income in the same
period that the hedged item affects income. The remaining gain or loss in excess of the cumulative change in the
present value of the cash flows of the hedged item, if any, is recognized in income. The gain or loss on
derivatives designated as hedges of investments in foreign subsidiaries is recognized in other comprehensive
income to offset the change in value of the net investments being hedged. Any ineffective portion of net
investment hedges is immediately recognized in income. Certain foreign-currency derivative instruments not
designated as hedging instruments have been entered into to manage a portion of the Corporation’s foreign
currency transactional exposures. The gain or loss on these derivatives is included in income in the period that
changes in their fair values occur.
New Accounting Standards
Effective January 1, 2008, the Corporation adopted Statement of Financial Accounting Standards (“SFAS”)
No. 157, Fair Value Measurements (“SFAS 157”). See Note 3 to the Consolidated Financial Statements.
Effective December 31, 2008, the Corporation adopted FSP FAS 140-4 and FIN 46(R)-8, Disclosures by
Public Entities (Enterprises) about Transfers of Financial Assets and Interests in Variable Interest Entities. The
objectives of the disclosure requirements of FIN 46(R)-8 are to provide financial statement users with an
understanding of:
• the significant judgments and assumptions made in determining whether to consolidate a variable
interest entity and/or disclose information about the company’s involvement with a variable interest
entity,
• the nature of restrictions on a consolidated variable interest entity’s assets reported in the statement of
financial position, including the carrying amounts of such assets,
• the nature of, and changes in, the risks associated with the company’s involvement with a variable
interest entity, and
• how the company’s involvement with a variable interest entity affects the company’s financial position,
financial performance, and cash flows.
These disclosures are contained in Notes 2, 7 and 12 to the Consolidated Financial Statements. The
Corporation has no transactions subject to the accounting or disclosure requirements of FAS 140, Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, a replacement of FASB Statement
125.
In February 2007, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 159, The Fair
Value Option for Financial Assets and Financial Liabilities (“SFAS 159”). SFAS 159 allows entities to choose,
at specified election dates, to measure financial instruments (financial assets and liabilities) at fair value (the
“Fair Value Option”). The election is made on an instrument-by-instrument basis and is irrevocable. If the Fair
Value Option is elected for an instrument, SFAS 159 specifies that all subsequent changes in fair value for that
instrument be reported in earnings. SFAS 159 was effective as of the beginning of the first fiscal year that began
after November 15, 2007. The Corporation has not applied the Fair Value Option to any of its existing financial
assets or liabilities.
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