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McKESSON CORPORATION
FINANCIAL NOTES (Continued)
99
Interest rate risk
Celesio also has interest rate swaps to hedge the interest rate risk associated with Celesio’s variable rate debt. Interest rate
swaps are used to modify the market risk exposures in connection with the variable rate debt to achieve primarily Euro dollar fixed
rate interest expense. The interest rate swap transactions generally involve the exchange of floating or fixed interest payments and
have a gross notional of $96 million at March 31, 2014. The interest rate swaps will mature during the first half of 2015. These
contracts are not designated for hedge accounting and, accordingly, changes in the fair value of the swaps were recorded directly
in earnings. Amounts recorded to earnings were not material for 2014.
Information regarding the fair value of derivatives on a gross basis is as follows:
Balance
Sheet
Caption
March 31, 2014 March 31, 2013
Fair Value of
Derivative U.S.
Dollar
Notional
Fair Value of
Derivative U.S
Dollar
Notional
(In millions) Asset Liability Asset Liability
Derivatives designated for
hedge accounting
Foreign exchange
contracts (current)
Prepaid
expenses and
other $ 4 $ — $ 64 $ — $ — $ —
Foreign exchange
contracts (non-current) Other assets 27 — 399 5 — 463
Foreign exchange
contracts (current) Other accrued
liabilities — — — — 1 41
Total $ 31 $ — $ 5 $ 1
Derivatives not designated for
hedge accounting
Foreign exchange
contracts (current)
Prepaid
expenses and
other $ 2 $ — $ 255 $ 5 $ — $ 177
Foreign exchange
contracts (current) Other accrued
liabilities — 13 836 — — —
Interest rate swap contracts
(current) Other accrued
liabilities — 1 96 — — —
Total $ 2 $ 14 $ 5 $ —
Refer to Financial Note 19, “Fair Value Measurements,” for more information on these recurring fair value measurements.