Coca Cola 2008 Annual Report Download - page 106

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THE COCA-COLA COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 11: HEDGING TRANSACTIONS AND DERIVATIVE FINANCIAL INSTRUMENTS (Continued)
Additionally, the Company enters into forward exchange contracts that are effective economic hedges and
are not designated as hedging instruments under SFAS No. 133. These instruments are used to offset the
earnings impact relating to the variability in foreign currency exchange rates on certain monetary assets and
liabilities denominated in nonfunctional currencies. Changes in the fair value of these instruments are
immediately recognized in earnings in the line item other income (loss)—net in our consolidated statements of
income to offset the effect of remeasurement of the monetary assets and liabilities.
The Company also enters into forward exchange contracts to hedge its net investment position in certain
major currencies. Under SFAS No. 133, changes in the fair value of these instruments are recognized in foreign
currency translation adjustment, a component of AOCI, to offset the change in the value of the net investment
being hedged. For the years ended December 31, 2008, 2007 and 2006, we recorded net gain (loss) in foreign
currency translation adjustment related to those instruments of approximately $3 million, $(7) million and
$3 million, respectively.
Commodities
The Company enters into commodity futures and other derivative instruments to mitigate exposure to
fluctuations in commodity prices and other market risks.
We purchase commodity futures to hedge forecasted cash flows related to future purchases of certain
commodities. The effective portion of the changes in fair value for these contracts, which have been designated
as commodity cash flow hedges, are reported in AOCI and reclassified into earnings in the same financial
statement line item and in the same period or periods during which the hedged transaction affects earnings. The
Company did not discontinue any commodity cash flow hedging relationships during the years ended
December 31, 2008, 2007 and 2006. Any ineffective portion, which was not significant in 2008, 2007 or 2006, of
the change in the fair value of these instruments was immediately recognized in net income.
The following tables present the carrying values, fair values and maturities of the Company’s derivative
instruments outstanding as of December 31, 2008 and 2007 (in millions):
Carrying Values Fair Values
Assets/(Liabilities)1Assets/(Liabilities)1Maturity
2008
Foreign currency forward contracts $ (124) $ (124) 2009-2010
Foreign currency options and collars 12 12 2009-2010
Interest rate locks (43) (43) 2009
Commodity futures (42) (42) 2009-2010
Other derivative instruments (17) (17) 2009
$ (214) $ (214)
1Does not include the impact of approximately $8 million of cash collateral held or placed with the
same counterparties.
104