Coca Cola 2010 Annual Report Download - page 115

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Fair Value Hedging Strategy
The Company uses interest rate swap agreements designated as fair value hedges to minimize exposure to changes in
the fair value of fixed-rate debt that results from fluctuations in benchmark interest rates. The changes in fair values of
derivatives designated as fair value hedges and the offsetting changes in fair values of the hedged items are recognized
in earnings. As of December 31, 2010, such adjustments decreased the carrying value of our long-term debt by
$102 million. Refer to Note 10. The changes in fair values of hedges that are determined to be ineffective are
immediately recognized in earnings. The total notional value of derivatives that were designated and qualified for the
Company’s fair value hedging program as of December 31, 2010, was approximately $4,750 million. The Company had
no outstanding derivative instruments under this hedging program as of December 31, 2009.
The following table summarizes the pretax impact that changes in the fair values of derivatives designated as fair value
hedges had on earnings during the year ended December 31, 2010 (in millions):
Location of Gain (Loss) Gain (Loss)
Hedging Instruments and Hedged Items Recognized in Income Recognized in Income
Interest rate swaps Interest expense $ (97)
Fixed-rate debt Interest expense 102
Total $5
Hedges of Net Investments in Foreign Operations Strategy
The Company uses forward contracts to protect the value of our investments in a number of foreign subsidiaries. For
derivative instruments that are designated and qualify as hedges of net investments in foreign operations, the changes in
fair values of the derivative instruments are recognized in net foreign currency translation gain (loss), a component of
AOCI, to offset the changes in the values of the net investments being hedged. Any ineffective portions of net
investment hedges are reclassified from AOCI into earnings during the period of change. The Company had no
outstanding derivative instruments under this hedging program as of December 31, 2010. The total notional value of
derivatives under this hedging program as of December 31, 2009, was approximately $250 million.
The following table presents the pretax impact that changes in the fair values of derivatives designated as net
investment hedges had on AOCI during the year ended December 31, 2010 and 2009 (in millions):
Gain (Loss)
Recognized in OCI
Year Ended December 31, 2010 2009
Foreign currency contracts $ (15) $ (33)
Total $ (15) $ (33)
The Company did not reclassify any deferred gains or losses related to net investment hedges from AOCI to earnings
during the year ended December 31, 2010 and 2009. In addition, the Company did not have any ineffectiveness related
to net investment hedges during the year ended December 31, 2010 and 2009.
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