Apple 2012 Annual Report Download - page 58

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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 fluctuates from contractually established thresholds. The Company presents its
derivative assets and derivative liabilities at their gross fair values. As of September 29, 2012, the Company
posted cash collateral related to the derivative instruments under its collateral security arrangements of
$278 million, which it recorded as other current assets in the Consolidated Balance Sheet. As of September 24,
2011, the Company received cash collateral related to the derivative instruments under its collateral security
arrangements of $288 million, which it recorded as accrued expenses in the Consolidated Balance Sheet. 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 29, 2012 or September 24, 2011.
The following tables show the Company’s derivative instruments at gross fair value as reflected in the
Consolidated Balance Sheets as of September 29, 2012 and September 24, 2011 (in millions):
2012
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 ......................... $138 $12 $150
Derivative liabilities (b):
Foreign exchange contracts ......................... $516 $41 $557
2011
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 ......................... $460 $56 $516
Derivative liabilities (b):
Foreign exchange contracts . . . . . . . . . . . . . . . . . . . . . . . . . $ 72 $37 $109
(a) The fair value of derivative assets is measured using Level 2 fair value inputs and is recorded as other
current assets in the Consolidated Balance Sheets.
(b) The fair value of derivative liabilities is measured using Level 2 fair value inputs and is recorded as accrued
expenses in the Consolidated Balance Sheets.
57