Pepsi 2013 Annual Report Download - page 122

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104
instruments that qualify for cash flow hedge accounting, any ineffectiveness is recorded immediately.
Ineffectiveness was not material for all periods presented. During the next 12 months, we expect to reclassify
net losses of $23 million related to these hedges from accumulated other comprehensive loss into net income.
As of December 28, 2013, approximately 31% of total debt, after the impact of the related interest rate
derivative instruments, was exposed to variable rates, compared to 27% as of December 29, 2012.
Fair Value Measurements
The fair values of our financial assets and liabilities as of December 28, 2013 and December 29, 2012 are
categorized as follows:
2013 2012
Assets(a) Liabilities(a) Assets(a) Liabilities(a)
Available-for-sale securities(b) $ 135 $ — $79$—
Short-term investments – index funds(c) $ 184 $ — $ 161 $ —
Prepaid forward contracts(d) $24$—
$33$—
Deferred compensation(e) $ — $ 504 $ — $ 492
Derivatives designated as fair value hedging
instruments:
Interest rate(f) $ 176 $ 10 $ 276 $ —
Derivatives designated as cash flow hedging
instruments:
Foreign exchange(g) $22$13
$5$19
Interest rate(f) 19 — 6—
Commodity(h) 629 824
$47$42
$19$43
Derivatives not designated as hedging
instruments:
Foreign exchange(g) $12$ 8
$8$6
Interest rate(f) 71 94 123 153
Commodity(h) 20 89 40 45
$ 103 $ 191 $ 171 $ 204
Total derivatives at fair value $ 326 $ 243 $ 466 $ 247
Total $ 669 $ 747 $ 739 $ 739
(a) Financial assets are classified on our balance sheet within prepaid expenses and other current assets and other assets, with the exception of
available-for-sale securities and short-term investments, which are classified as short-term investments. Financial liabilities are classified
on our balance sheet within accounts payable and other current liabilities and other liabilities. Unless specifically indicated, all financial
assets and liabilities are categorized as Level 2 assets or liabilities.
(b) Based on the price of common stock. Categorized as a Level 1 asset.
(c) Based on the price of index funds. Categorized as a Level 1 asset.
(d) Based primarily on the price of our common stock.
(e) Based on the fair value of investments corresponding to employees’ investment elections. As of December 28, 2013, all balances are
categorized as Level 2 liabilities. As of December 29, 2012, $10 million are categorized as Level 1 liabilities and the remaining balances
are categorized as Level 2 liabilities.
(f) Based on LIBOR forward rates and recently reported market transactions of spot and forward rates.
(g) Based on recently reported market transactions of spot and forward rates.
(h) Based on recently reported market transactions, primarily swap arrangements.
The carrying amounts of our cash and cash equivalents and short-term investments approximate fair value
due to the short-term maturity. Short-term investments consist principally of short-term time deposits and
index funds used to manage a portion of market risk arising from our deferred compensation liability. The