Seagate 2010 Annual Report Download - page 98

Table of Contents
SEAGATE TECHNOLOGY PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
7. Derivative Financial Instruments
The Company is exposed to foreign currency exchange rate, interest rate, and to a lesser extent, equity price risks relating to its ongoing
business operations. The Company enters into foreign currency forward exchange contracts in order to manage the foreign currency exchange
rate risk on forecasted expenses denominated in foreign currencies and to mitigate the remeasurement risk of certain foreign currency
denominated liabilities. The Company's accounting policies for these instruments are based on whether the instruments are classified as
designated or non-designated hedging instruments. The Company records all derivatives in the Consolidated Balance Sheets at fair value. The
effective portions of designated cash flow hedges are recorded in Accumulated other comprehensive income (loss) until the hedged item is
recognized in earnings. Derivatives that are not designated as hedging instruments and the ineffective portions of cash flow hedges are adjusted
to fair value through earnings. As of July 1, 2011 and July 2, 2010, the Company had net unrealized gains on cash flow hedges of approximately
$2 million and $3 million, respectively.
The Company dedesignates its cash flow hedges when the forecasted hedged transactions are realized or it is probable the forecasted
hedged transactions will not occur in the initially identified time period. At such time, the associated gains and losses deferred in Accumulated
other comprehensive income (loss) are reclassified immediately into earnings and any subsequent changes in the fair value of such derivative
instruments are immediately reflected in earnings. The Company did not recognize any material net gains or losses related to the loss of hedge
designation on discontinued cash flow hedges during fiscal years 2011, 2010, and 2009. As of July 1, 2011, the Company's existing foreign
currency forward exchange contracts mature within 12 months. The deferred amount currently recorded in Accumulated other comprehensive
income (loss) expected to be recognized into earnings over the next 12 months is a net gain of $3 million.
As of July 1, 2011, the total notional value of the Company's outstanding foreign currency forward exchange contracts was:
As of July 2, 2010, the total notional value of the Company's outstanding foreign currency forward exchange contracts was:
92
(Dollars in
millions)
Contracts Designated as
Hedges Contracts Not Designated as Hedges
Thai baht
$
98
$
235
Singapore
dollars
212
9
Chinese
Renminbi
78
—
Czech
koruna
—
11
$
388
$
255
(Dollars in
millions)
Contracts Designated as
Hedges Contracts Not Designated as Hedges
Thai baht
$
406
$
163
Singapore
dollars
84
8
Japanese
Yen
1
—
Czech
koruna
—
10
$
491
$
181