Memorex 2011 Annual Report Download - page 86

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
contracts. The degree of our hedging can fluctuate based on management judgment and forecasted projections. We formally
document all relationships between hedging instruments and hedged items, as well as our risk management objective and
strategy for undertaking the hedge items. This process includes linking all derivatives to forecasted transactions.
We also formally assess, both at the hedge’s inception and on an ongoing basis, whether the derivatives used in
hedging transactions are highly effective in offsetting changes in the cash flows of hedged items. Gains and losses related to
cash flow hedges are deferred in accumulated other comprehensive income (loss) with a corresponding asset or liability.
When the hedged transaction occurs, the gains and losses in accumulated other comprehensive income (loss) are
reclassified into the Consolidated Statements of Operations in the same line as the item being hedged. If at any time it is
determined that a derivative is not highly effective as a hedge, we discontinue hedge accounting prospectively, with deferred
gains and losses being recognized in current period operations.
As of December 31, 2011 and 2010, cash flow hedges ranged in duration from one to 16 months and had a total
notional amount of $208.2 million and $246.0 million, respectively. Hedge gains of $0.8 million in 2011, and hedge losses of
$0.1 million, and $3.8 million in 2010 and 2009, respectively, were reclassified into the Consolidated Statements of
Operations. The amount of net deferred gains on foreign currency cash flow hedges included in accumulated other
comprehensive income (loss) in shareholders’ equity as of December 31, 2011 was $2.2 million, pre-tax, which depending on
market factors is expected to reverse in the Consolidated Balance Sheets or be reclassified into operations in 2012.
Other Hedges
We enter into foreign currency forward contracts, generally with durations of one to three months, to manage the foreign
currency exposure related to our monetary assets and liabilities denominated in foreign currencies. We record the estimated
fair value of these forwards within other current assets or other current liabilities in the Consolidated Balance Sheets and all
changes in their fair value are immediately recognized in the Consolidated Statements of Operations.
As of December 31, 2011 and 2010, we had a notional amount of forward contracts of $32.9 million and $47.1 million,
respectively, to hedge our recorded balance sheet exposures.
Our financial assets and liabilities that are measured at fair value on a recurring basis were as follows:
December 31, 2011 December 31, 2010
Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Unobservable
Inputs
(Level 3)
Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Unobservable
Inputs
(Level 3)
(In millions)
Derivative assets
Foreign currency option
contracts ................ $— $2.3 $— $— $3.5 $—
Foreign currency forward
contracts ................ — 1.1 — — — —
Derivative liabilities
Foreign currency option
contracts ................ — (1.4) — — (2.3) —
Foreign currency forward
contracts ................ — — — — — —
Total ..................... $— $2.0 $— $— $1.2 $—
There were no transfers into or out of Level 1 or Level 2 during the year ended December 31, 2011.
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