Medtronic 2012 Annual Report Download - page 111

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Medtronic, Inc.
Notes to Consolidated Financial Statements (Continued)
94
(losses)/gains were $(183) million, $92 million, and $56 million, in fiscal years 2012, 2011, and 2010,
respectively. These (losses)/gains represent the net impact to the consolidated statements of earnings for the
derivative instruments presented below, offset by remeasurement gains/(losses) on foreign currency
denominated assets and liabilities.
The information that follows explains the various types of derivatives and financial instruments used by
the Company, how and why the Company uses such instruments, how such instruments are accounted for,
and how such instruments impact the Company’s consolidated balance sheets and statements of earnings.
Freestanding Derivative Forward Contracts
Freestanding derivative forward contracts are used to offset the Company’s exposure to the change
in value of specific foreign currency denominated assets and liabilities. These derivatives are not designated
as hedges, and therefore, changes in the value of these forward contracts are recognized currently in earnings,
thereby offsetting the current earnings effect of the related change in U.S. dollar value of foreign
currency denominated assets and liabilities. The cash flows from these contracts are reported as operating
activities in the consolidated statements of cash flows. The gross notional amount of these contracts, not
designated as hedging instruments, outstanding at April 27, 2012 and April 29, 2011 was $2.039 billion and
$2.453 billion, respectively.
The amount of gains/(losses) and location of the gains/(losses) in the consolidated statements of
earnings related to derivative instruments not designated as hedging instruments for the fiscal years ended
April 27, 2012 and April 29, 2011 are as follows:
April 27, 2012
(in millions)
Derivatives Not Designated as Hedging Instruments Location Amount
_________________________________________________ ______________________ ________
Foreign currency exchange rate contracts Other expense, net $ 53
April 29, 2011
(in millions)
Derivatives Not Designated as Hedging Instruments Location Amount
_________________________________________________ ______________________ ________
Foreign currency exchange rate contracts Other expense, net $ (107)
Cash Flow Hedges
Foreign Currency Exchange Rate Risk Forward contracts designated as cash flow hedges are designed
to hedge the variability of cash flows associated with forecasted transactions denominated in a foreign
currency that will take place in the future. For derivative instruments that are designated and qualify as a
cash flow hedge, the effective portion of the gain or loss on the derivative is reported as a component of
accumulated other comprehensive loss and reclassified into earnings in the same period or periods during
which the hedged transaction affects earnings. No gains or losses relating to ineffectiveness of cash flow
hedges were recognized in earnings during fiscal years 2012, 2011, or 2010. No components of the hedge
contracts were excluded in the measurement of hedge ineffectiveness and no hedges were derecognized or
discontinued during fiscal years 2012, 2011, or 2010. The cash flows from these contracts are reported as
operating activities in the consolidated statements of cash flows. The gross notional amount of these
contracts, designated as cash flow hedges, outstanding at April 27, 2012 and April 29, 2011 was $3.097 billion
and $4.381 billion, respectively, and will mature within the subsequent 24-month period.