Southwest Airlines 2012 Annual Report Download - page 108
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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,
2012
December 31,
2011
Cash collateral deposits provided
to counterparties—noncurrent .....
Offset against Other
noncurrent liabilities $ — $ 41
Cash collateral deposits provided
to counterparties—current ........
Offset against Accrued
liabilities — 185
Due to third parties for fuel
contracts ...................... Accrued liabilities — 21
Receivable from third parties for
fuel contracts—current ...........
Accounts and other
receivables — 3
Receivable from third parties for
fuel contracts—noncurrent ........ Other assets 54 —
Prepaid settlement for
fuel contracts—current ........... Prepaid expenses 15 —
The following tables present the impact of derivative instruments and their location within the Consolidated
Statement of Income for the years ended December 31, 2012 and 2011:
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) 2012 2011 2012 2011 2012 2011
Fuel derivative contracts ..... $ (19)* $ 44* $ 101* $ 111* $ 43 $ 35
Interest rate derivatives ...... 1* 32* — — — —
Total ..................... $ (18) $ 76 $ 101 $ 111 $ 43 $ 35
* 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) 2012 2011
Fuel derivative contracts .............. $ (264) $ 53 Other (gains) losses, net
The Company also recorded expense associated with premiums paid for fuel derivative contracts that
settled/expired during 2012, 2011, and 2010 of $36 million, $107 million, and $134 million, respectively. 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 the derivative instruments, depending on the type of instrument, were determined by the
use of present value methods or option value models with assumptions about commodity prices based on those
observed in underlying markets or provided by third parties. Included in the Company’s cumulative net
100