Toshiba 2010 Annual Report Download - page 111

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49
adverse fluctuations in foreign currency exchange and interest rates. These agreements mature during the period 2010 to 2015.
Forward exchange contracts, interest rate swap agreements and currency swap agreements are designated as either fair value
hedges or cash flow hedges, except for some contracts, depending on accounts receivable and payable denominated in foreign curren-
cies or commitments on future trade transactions and the interest rate characteristics of the underlying debt as discussed below.
Fair Value Hedge Strategy
The forward exchange contracts and currency swap agreements utilized by the Company effectively reduce fluctuation in fair
value of accounts receivable and payable denominated in foreign currencies.
The interest rate swap agreements utilized by the Company effectively convert a portion of its fixed-rate debt to a floating-
rate basis.
The gain or loss on the derivative financial instruments designated as fair value hedges is offset by the loss or gain on the
hedged items in the same location of the consolidated statements of income.
Cash Flow Hedge Strategy
The forward exchange contracts utilized by the Company effectively reduce fluctuation in cash flow from commitments on
future trade transactions denominated in foreign currencies for the next 5 years.
The interest rate swap agreements utilized by the Company effectively convert a portion of its floating-rate debt to a fixed-
rate basis for the next 6 years.
The Company expects to reclassify ¥24 million ($258 thousand) of net income on derivative financial instruments from
accumulated other comprehensive loss to net income (loss) attributable to shareholders of Toshiba Corporation during the
next 12 months due to the collection of accounts receivable denominated in foreign currencies and the payments of accounts
payable denominated in foreign currencies and variable interest associated with the floating-rate debts.
Derivatives Not Designated as Hedging Instruments Strategy
The Company has entered into certain forward exchange contracts, interest rate swap agreements, currency swap agreements
and currency options to offset the earnings impact related to fluctuations in foreign currency exchange rates on monetary
assets and liabilities denominated in foreign currencies and in interest rates on debt instruments. Although some of these con-
tracts have not been designated as hedges as required in order to apply hedge accounting, the contracts are effective from an
economic perspective. The changes in the fair value of those contracts are recorded in earnings immediately.
The Company’s forward exchange contract amounts, the aggregate notional principal amounts of interest rate swap agree-
ments, currency swap agreements and currency options outstanding at March 31, 2010 and 2009 are summarized below:
Thousands of
Millions of yen U.S. dollars
March 31 2010 2009 2010
Forward exchange contracts:
To sell foreign currencies ¥183,818 ¥196,828 $1,976,538
To buy foreign currencies 133,862 162,506 1,439,376
Interest rate swap agreements 249,050 270,300 2,677,957
Currency swap agreements 182,468 86,021 1,962,022
Currency options 41,984 —451,441