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Table of Contents
collateral received from certain counterparties. The Company’
s exposure to credit loss and market risk will vary over time as a function of
currency exchange rates. Although the table above reflects the notional principal and credit risk amounts of the Company’
s foreign exchange
instruments, it does not reflect the gains or losses associated with the exposures and transactions that the foreign exchange instruments are
intended to hedge. The amounts ultimately realized upon settlement of these financial instruments, together with the gains and losses on the
underlying exposures, will depend on actual market conditions during the remaining life of the instruments.
The Company generally enters into master netting arrangements, which reduce credit risk by permitting net settlement of transactions with the
same counterparty. To further limit credit risk, the Company generally enters into collateral security arrangements that provide for collateral to
be received or posted when the net fair value of certain financial instruments fluctuate from contractually established thresholds. The Company
presents its derivative assets and derivative liabilities at their gross fair values. As of September 25, 2010, the Company has posted cash
collateral related to the derivative instruments under its collateral security arrangements of $445 million and recorded the offsetting balance as
other current assets in the Consolidated Balance Sheet. The Company did not record any significant amounts of cash collateral related to the
derivative instruments under its master netting arrangements as of September 26, 2009. The Company did not have any derivative instruments
with credit risk-related contingent features that would require it to post additional collateral as of September 25, 2010 or September 26, 2009.
The estimates of fair value are based on applicable and commonly used pricing models and prevailing financial market information as of
September 25, 2010. Refer to Note 3, “Fair Value Measurements” of this Form 10-
K, for additional information on the fair value measurements
for all financial assets and liabilities, including derivative assets and derivative liabilities, that are measured at fair value in the consolidated
financial statements on a recurring basis. The following tables show the Company’
s derivative instruments measured at gross fair value as
reflected in the Consolidated Balance Sheets as of September 25, 2010 and September 26, 2009 (in millions):
62
September 25, 2010
Fair Value of
Derivatives
Designated as
Hedge Instruments
Fair Value of
Derivatives Not
Designated as
Hedge
Instruments
Total Fair Value
Derivative assets (a):
Foreign exchange contracts
$
62
$
45
$
107
Derivative liabilities (b):
Foreign exchange contracts
$
488
$
118
$
606
September 26, 2009
Fair Value of
Derivatives
Designated as
Hedge Instruments
Fair Value of
Derivatives Not
Designated as
Hedge
Instruments
Total Fair Value
Derivative assets (a):
Foreign exchange contracts
$
27
$
10
$
37
Derivative liabilities (b):
Foreign exchange contracts
$
24
$
1
$
25
(a)
All derivative assets are recorded as other current assets in the Consolidated Balance Sheets.
(b)
All derivative liabilities are recorded as accrued expenses in the Consolidated Balance Sheets.