Medtronic 2015 Annual Report Download - page 112

Medtronic plc
Notes to Consolidated Financial Statements (Continued)
As of April 24, 2015 and April 25, 2014, the Company had $210 million and $(44) million, respectively, in after-tax net
unrealized gains (losses) associated with cash flow hedging instruments recorded in accumulated other comprehensive loss. The
Company expects that $230 million of after-tax net unrealized gains as of April 24, 2015 will be reclassified into the
consolidated statements of earnings over the next 12 months.
Fair Value Hedges
Interest rate derivative instruments designated as fair value hedges are designed to manage the exposure to interest rate
movements and to reduce borrowing costs by converting fixed-rate debt into floating-rate debt. Under these agreements, the
Company agrees to exchange, at specified intervals, the difference between fixed and floating interest amounts calculated by
reference to an agreed-upon notional principal amount.
As of April 24, 2015 and April 25, 2014, the Company had interest rate swaps in gross notional amounts of $2.025 billion and
$2.625 billion, respectively, designated as fair value hedges of underlying fixed rate obligations. As of April 24, 2015 and
April 25, 2014, the Company had interest rate swap agreements designated as fair value hedges of underlying fixed rate
obligations including the Company’s, $600 million 4.750 percent 2005 Senior Notes due 2016, the $500 million 2.625 percent
2011 Senior Notes due 2016, the $500 million 4.125 percent 2011 Senior Notes due 2021, and the $675 million 3.125 percent
2012 Senior Notes due 2022. As of April 25, 2014, the Company also had an interest rate swap agreement designated as a fair
value hedge underlying the fixed rate obligation related to the Company’s $1.250 billion 3.000 percent 2010 Senior Notes,
which were due during fiscal year 2015.
As of April 24, 2015 and April 25, 2014, the market value of outstanding interest rate swap agreements was an unrealized gain
of $18 million and $68 million, respectively, and the market value of the hedged items was an unrealized loss of $18 million and
$68 million, respectively, which was recorded in other assets, prepaid expenses and other current assets, and other long-term
liabilities with the offsets recorded in long-term debt and short-term borrowings on the consolidated balance sheets. No
significant hedge ineffectiveness was recorded as a result of these fair value hedges for fiscal year 2015, 2014, and 2013.
During fiscal years 2015, 2014, and 2013, the Company did not have any ineffective fair value hedging instruments. In addition,
the Company did not recognize any gains or losses during fiscal years 2015, 2014, or 2013 on firm commitments that no longer
qualify as fair value hedges.
Balance Sheet Presentation
The following tables summarize the location and fair value amounts of derivative instruments reported in the consolidated
balance sheets as of April 24, 2015 and April 25, 2014. 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.
April 24, 2015
Asset Derivatives Liability Derivatives
(in millions) Balance Sheet Location
Fair
Value Balance Sheet Location
Fair
Value
Derivatives designated as hedging
instruments
Interest rate contracts
Prepaid expenses and
other current assets $ 10 Other accrued expenses $ —
Foreign currency exchange rate contracts
Prepaid expenses and
other current assets 382 Other accrued expenses 12
Interest rate contracts Other assets 79
Other long-term
liabilities 71
Foreign currency exchange rate contracts Other assets 143
Other long-term
liabilities 3
Total derivatives designated as hedging
instruments $ 614 $ 86
102