Apple 1994 Annual Report Download - page 33

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(A) Adjusted to conform with current year presentation. (B) Fair value is less than $0.5 million.
The interest rate swaps shown above generally require the Company to pay a floating interest rate based on three- or six-month U.S. dollar
LIBOR and receive a fixed rate of interest based on two-, three-, and ten-year swap rates without exchanges of the underlying notional
amounts. Maturity dates for interest rate swaps currently range from one to ten years. Interest rate option contracts require the Company to
make payments should certain interest rates either fall below or rise above predetermined levels. All interest rate option contracts outstanding at
September 30, 1994, expire within 18 months.
Interest rate contracts not accounted for as hedges are carried at fair value with gains and losses recorded currently in income. Unrealized gains
and losses on interest rate contracts that are designated and effective as hedges are deferred and recognized in income in the same period as the
hedged transaction. Unrealized losses on such agreements totaled approximately $40 million at September 30, 1994, primarily reflecting the net
present value of unrealized losses on the ten-year swap contracts, which effectively convert the Company's fixed-rate ten- year debt to floating-
rate debt. There were no deferred gains and losses on interest rate contracts as of September 24, 1993.
The foreign exchange forward contracts not accounted for as hedges are carried at fair value and are adjusted each balance sheet date for
changes in exchange rates. Unrealized gains and losses on foreign exchange forward contracts that are designated and effective as hedges are
deferred and recognized in income in the same period as the hedged transactions. Deferred gains and losses on such agreements at September
30, 1994, and at September 24, 1993, were immaterial. All foreign exchange forward contracts expire within one year.
Purchased and sold foreign exchange option contracts that qualify for hedge accounting treatment are reported on the balance sheet at the
premium cost, which is amortized over the life of the option. Unrealized gains and losses on these option contracts are deferred until the
occurrence of the hedged transaction and recognized as a
30
1994 1993(A)
Credit Credit
Notional Fair Risk Notional Fair Risk
Principal Value Amount Principal Value Amount
Transactions Qualifying as Accounting Hedges
Interest rate instruments
Swaps $ 699 $ (40) -- -- -- --
Foreign exchange instruments
Spot / Forward contracts $2,385 $ (23) $ 15 $ 2,114 $ 6 $ 19
Purchased options $1,510 $ 17 $ 21 $ 1,637 $ 28 $ 33
Sold options $ 302 $ (1) -- $ 765 --(B) --
Transactions Other Than Accounting Hedges
Interest rate instruments
Swaps -- -- -- $ 112 --(B) --
Sold options $ 148 --(B) -- $ 67 --(B) --
Foreign exchange instruments
Spot / Forward contracts $ 300 --(B) --(B) $ 574 $ 2 $ 10
Purchased options $1,600 $ 32 $ 32 $ 1,608 $ 24 $ 24
Sold options $5,511 $ (45) -- $ 5,282 $(39) --