Apple 2007 Annual Report Download - page 75

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Typically, the Company hedges portions of its forecasted foreign currency exposure associated with revenue and inventory purchases over a time
horizon of up to 6 months.
Derivative instruments designated as cash flow hedges must be de-designated as hedges when it is probable the forecasted hedged transaction
will not occur in the initially identified time period or within a subsequent 2 month time period. Deferred gains and losses in other
comprehensive income associated with such derivative instruments are immediately reclassified into earnings in other income and expense. Any
subsequent changes in fair value of such derivative instruments are also reflected in current earnings unless they are re-designated as hedges of
other transactions. The Company recognized net gains of approximately $672,000 and $421,000 in 2007 and 2006, respectively, and a net loss of
$1.6 million in 2005 in other income and expense related to the loss of hedge designation on discontinued cash flow hedges due to changes in the
Company's forecast of future net sales and cost of sales and due to prevailing market conditions. As of September 29, 2007, the Company had a
net deferred gain associated with cash flow hedges of approximately $468,000, net of taxes, substantially all of which is expected to be
reclassified to earnings by the end of the second quarter of fiscal 2008.
The net gain or loss on the effective portion of a derivative instrument designated as a net investment hedge is included in the cumulative
translation adjustment account of accumulated other comprehensive income within shareholders' equity. For the years ended September 29, 2007
and September 30, 2006, the Company had a net loss of $2.6 million and a net gain of $7.4 million, respectively, included in the cumulative
translation adjustment.
The Company may also enter into foreign currency forward and option contracts to offset the foreign exchange gains and losses generated by the
re-measurement of certain assets and liabilities recorded in non-functional currencies. Changes in the fair value of these derivatives are
recognized in current earnings in other income and expense as offsets to the changes in the fair value of the related assets or liabilities. Due to
currency market movements, changes in option time value can lead to increased volatility in other income and expense.
Note 3—Consolidated Financial Statement Details (in millions)
Other Current Assets
71
2007
2006
Vendor non
-
trade receivables
$
2,392
$
1,593
NAND flash memory prepayments
417
208
Other current assets
996
469
Total other current assets
$
3,805
$
2,270