Medtronic 2010 Annual Report Download - page 86

82Medtronic, Inc.
Notes to Consolidated Financial Statements
(continued)
Concentrations of Credit Risk
Financial instruments, which potentially subject the Company to
significant concentrations of credit risk, consist principally of
interest-bearing investments, forward exchange derivative
contracts and trade accounts receivable.
The Company maintains cash and cash equivalents, investments
and certain other financial instruments (including forward
exchange contracts) with various major financial institutions. The
Company performs periodic evaluations of the relative credit
standings of these financial institutions and limits the amount of
credit exposure with any one institution. Beginning in fiscal year
2010, the Company entered into collateral credit agreements with
its primary derivatives counterparties. Under these agreements
either party is required to post eligible collateral when the market
value of transactions covered by the agreement exceeds specific
thresholds, thus limiting credit exposure for both parties. As of
April 30, 2010 the Company received cash collateral of $123
million from its counterparty. The collateral primarily supports the
approximate fair value of the Company’s derivative contracts. The
collateral received obligation was recorded as an increase in cash
and cash equivalents with the offset recorded as an increase in
other accrued expenses on the consolidated balance sheet.
Concentrations of credit risk with respect to trade accounts
receivable are limited due to the large number of customers and
their dispersion across many geographic areas. The Company
monitors the creditworthiness of its customers to which it grants
Balance Sheet Presentation
The following table summarizes the location and fair value amounts of derivative instruments reported in the consolidated balance sheet
as of April 30, 2010 and April 24, 2009. The fair value amounts are presented on a gross basis and are segregated between derivatives
that are designated and qualify as hedging instruments and those that are not, and are further segregated by type of contract within
those two categories.
Asset Derivatives Liability Derivatives
April 30, 2010
(in millions)
Balance Sheet
Location
Fair
Value
Balance Sheet
Location
Fair
Value
Derivatives designated as hedging instruments:
Foreign currency exchange rate contracts
Prepaid expenses and
other current assets $198
Other accrued
expenses $44
Interest rate contracts Other assets 31
Foreign currency exchange rate contracts Other assets 65
Other long-
term liabilities 2
Total derivatives designated as hedging instruments $294 $46
Derivatives not designated as hedging instruments:
Foreign currency exchange rate contracts
Prepaid expenses and
other current assets $ 2
Other accrued
expenses $ 1
Total derivatives not designated as hedging instruments $ 2 $ 1
Total derivatives $296 $47
Asset Derivatives Liability Derivatives
April 24, 2009
(in millions)
Balance Sheet
Location
Fair
Value
Balance Sheet
Location
Fair
Value
Derivatives designated as hedging instruments:
Foreign currency exchange rate contracts
Prepaid expenses and
other current assets $249
Other accrued
expenses $27
Foreign currency exchange rate contracts Other assets 187
Other long-term
liabilities 3
Total derivatives designated as hedging instruments $436 $30
Derivatives not designated as hedging instruments:
Foreign currency exchange rate contracts
Prepaid expenses and
other current assets $ —
Other accrued
expenses $ 1
Total derivatives not designated as hedging instruments $ — $ 1
Total derivatives $436 $31