National Oilwell Varco 2012 Annual Report Download - page 78

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Index to Financial Statements
At December 31, 2011 and 2010, the Company had the following outstanding foreign currency forward contracts that were entered into to hedge nonfunctional currency cash
flows from forecasted revenues and costs (in millions):
Currency Denomination
December 31,
Foreign Currency 2011 2010
Norwegian Krone NOK 6,639 NOK 4,983
Euro  456  122
U.S. Dollar $ 402 $ 247
Danish Krone DKK 98 DKK 31
Singapore Dollar SGD 10 SGD
British Pound Sterling £ 2 £ 4
Fair Value Hedging Strategy
For derivative instruments that are designated and qualify as a fair value hedge (i.e., hedging the exposure to changes in the fair value of an asset or a liability or an identified
portion thereof that is subject to a particular risk), the gain or loss on the derivative instrument as well as the offsetting loss or gain on the hedged item attributable to the
hedged risk are recognized in the same line item associated with the hedged item in current earnings (e.g., in revenue when the hedged item is a contracted sale).
The Company enters into forward exchange contracts to hedge certain firm commitments of revenue and costs that are denominated in currencies other than the functional
currency of the operating unit. The purpose of the Companys foreign currency hedging activities is to protect the Company from risk that the eventual U.S. dollar-equivalent
cash flows from the sale of products to customers will be adversely affected by changes in the exchange rates.
At December 31, 2011 and 2010, the Company had the following outstanding foreign currency forward contracts that were entered into to hedge nonfunctional currency fair
values of firm commitments of revenues and costs (in millions):
Currency Denomination
December 31,
Foreign Currency 2011 2010
U.S. Dollar $ $ 1
Non-designated Hedging Strategy
For derivative instruments that are non-designated, the gain or loss on the derivative instrument is recognized in the same line item associated with the hedged item in current
earnings.
The Company enters into forward exchange contracts to hedge certain nonfunctional currency monetary accounts. The purpose of the Companys foreign currency hedging
activities is to protect the Company from risk that the eventual U.S. dollar-equivalent cash flows from the nonfunctional currency monetary accounts will be adversely
affected by changes in the exchange rates.
At December 31, 2011 and 2010, the Company had the following outstanding foreign currency forward contracts that hedge the fair value of nonfunctional currency monetary
accounts (in millions):
Currency Denomination
December 31,
Foreign Currency 2011 2010
Norwegian Krone NOK 2,310 NOK 1,442
Russian Ruble RUB 786 RUB 780
U.S. Dollar $ 483 $ 328
Euro 161  97
Danish Krone DKK 67 DKK 115
British Pound Sterling £ 9 £ 8
Singapore Dollar SGD 5 SGD
Swedish Krone SEK 4 SEK
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