Coca Cola 2014 Annual Report Download - page 98

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96
The following table presents the pretax impact that changes in the fair values of derivatives designated as cash flow hedges had on
AOCI and earnings during the years ended December 31, 2014, 2013 and 2012 (in millions):
Gain (Loss
Recognized
in Other
Comprehensive
Income (“OCI’’
)
)Location of Gain (Loss
Recognized in Income1
)
Gain (Loss
Reclassified from
AOCI into Income
(Effective Portion
)
)
Gain (Loss
Recognized in Income
(Ineffective Portion and
Amount Excluded from
Eff
ectiven
ess Testing
)
)
2014
Foreign currency contracts $ 973 Net operating revenues $ 121 $ —2
Foreign currency contracts 50 Cost of goods sold 34 —2
Foreign currency contracts (218) Other income (loss) — net (108) —
Interest rate contracts (180) Interest expense — —
Commodity contracts —Cost of goods sold 3 —
Total $ 625 $ 50 $ —
2013
Foreign currency contracts $ 218 Net operating revenues $ 149 $ 1
Foreign currency contracts 52 Cost of goods sold 32 —2
Interest rate contracts 169 Interest expense (12) (3)
Commodity contracts 2 Cost of goods sold (2) —
Total $ 441 $ 167 $ (2)
2012
Foreign currency contracts $ 59 Net operating revenues $ (46) $ 2
Foreign currency contracts 34 Cost of goods sold (23) —
Interest rate contracts 1 Interest expense (12) —2
Commodity contracts (4) Cost of goods sold (1) —
Total $ 90 $ (82) $ 2
1
The Company records gains and losses reclassified from AOCI in income for the effective portion and ineffective portion, if any, to the same line items in
our consolidated statements of income.
2
Includes a de minimis amount of ineffectiveness in the hedging relationship.
As of December 31, 2014, the Company estimates that it will reclassify into earnings during the next 12 months gains of approximately
$416 million from the pretax amount recorded in AOCI as the anticipated cash flows occur.
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. The ineffective portions of
these hedges are immediately recognized into earnings. As of December 31, 2014, such adjustments increased the carrying value of
our long-term debt by $34 million. Refer to Note 10. When a derivative is no longer designated as a fair value hedge for any reason,
including termination and maturity, the remaining unamortized difference between the carrying value of the hedged item at that time
and the par value of the hedged item is amortized to earnings over the remaining life of the hedged item, or immediately if the hedged
item has matured. The changes in fair values of hedges that are determined to be ineffective are immediately recognized into earnings.
The total notional values of derivatives that related to our fair value hedges of this type were $6,600 million and $5,600 million as of
December 31, 2014 and 2013, respectively.