Southwest Airlines 2010 Annual Report Download - page 90

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In addition, the Company also had the following amounts associated with fuel derivative instruments and
hedging activities in its Consolidated Balance Sheet:
(in millions)
Balance Sheet
Location
December 31,
2010 2009
Cash collateral deposits provided to counterparty—noncurrent ........... Offset against
Other noncurrent
liabilities $125 $238
Cash collateral deposits provided to counterparty—current .............. Offset against
Accrued liabilities — 92
Cash collateral deposits held from counterparty—noncurrent ............ Offset against
Other assets 60 —
Due to third parties for settled fuel contracts ......................... Accrued liabilities — 15
Receivable from third parties for settled fuel contracts .................. Accounts and other
receivables 1 —
Net unrealized losses from fuel hedges, net of tax ..................... Accumulated other
comprehensive loss 250 580
The following tables present the impact of derivative instruments and their location within the Consolidated
Statement of Income for the years ended December 31, 2010 and 2009:
Derivatives in Cash Flow Hedging Relationships
(Gain) Loss
Recognized in AOCI
on Derivatives
(effective portion)
(Gain) Loss
Reclassified from
AOCI into Income
(effective portion)(a)
(Gain) Loss
Recognized in
Income on
Derivatives
(ineffective
portion)(b)
Year Ended
December 31,
Year Ended
December 31,
Year Ended
December 31,
(in millions) 2010 2009 2010 2009 2010 2009
Fuel derivative contracts ............................ $(47)* $ 12* $283* $378* $ (7) $ (91)
Interest rate derivatives ............................. 15* (27)* — — — —
Total ........................................... $(32) $(15) $283 $378 $ (7) $ (91)
* Net of tax
(a) Amounts related to fuel derivative contracts and interest rate derivatives are included in Fuel and oil and
Interest expense, respectively.
(b) Amounts are included in Other (gains) losses, net.
Derivatives not in Cash Flow Hedging Relationships
(Gain) Loss Recognized in Income on
Derivatives
Year Ended
December 31, Location of (Gain) Loss
Recognized in Income
on Derivatives(in millions) 2010 2009
Fuel derivative contracts ..................................... $(26) $(117) Other (gains) losses, net
The Company also recorded expense associated with premiums paid for fuel derivative contracts that
settled/expired during 2010, 2009, and 2008, respectively, of $134 million, $148 million, and $69 million. These
amounts are excluded from the Company’s measurement of effectiveness for related hedges and are included as a
component of Other (gains) losses, net in the Consolidated Statement of Income.
The fair values of derivative instruments, depending on the type of instrument, were determined by the use
of present value methods or standard option value models with assumptions about commodity prices based on
84